Fed's Fiscal Court Dramatically Impacts Care-Dependent Individuals with "Personal Budget" Ruling
Streamlined Finances for Individuals with Disabilities and Dependent Care: 'Personal Budget' Simplification by the Federal Finance Court - Relieving personal budget obligations for disabled and care-dependent individuals ruled by the Federal Finance Court
Wanna know what's happening with that personal budget thingy for disabled or care-dependents? Well, buckle up, 'cause the Federal Fiscal Court (Bundesfinanzhof, BFH) just dropped a bombshell, and it's gonna change things for those chaps.
Here's the tea: The BFH sided with a sweet company from Hessen that specializes in various assistance services for the mentally ill, drug addicts, and people with intellectual disabilities. These fine folks were reimbursed through their personal budgets, which were furnished by the Hessian State Welfare Association, the responsible social assistance authority, and used to fund the services.
The company got into a spat with the tax office. The tax office argued that the company had to smack on some VAT (Value Added Tax, for the uninitiated) on those revenues, but the company said nah, that’s not right. Principally, services rendered by a company for care and support are exempt from VAT if the health or social insurance shells out at least 25%, but the tax office said the company didn't straighten things out with the social authorities, only with the clients.
But, according to the Munich ruling, the company’s on the level. That money for the personal budget comes from social authorities, and they set the guidelines on which services the budget can be zapped on. The affected individuals make the decisions on the provider and payment, but economically speaking, the care and support are still covered by social insurance fonds. It’s all part of that 25%, mon ami.
Now, hold up! Though the Finance Court of Baden-Württemberg needs to squash some stuff related to whether the plaintiff company exclusively billed services covered by the social authorities, this ruling sets a powerful precedent.
Sources:
- VAT exemptions for medical services have been in the limelight recently, with the Federal Fiscal Court (BFH) releasing a ruling on December 19, 2024, addressing VAT exemptions in the medical field[1].
- The realm of tax exemptions for care or support services is still muckin' around, as evidenced by ongoing disputes[1].
- E-invoicing compliance issues and VAT adjustments are part of the点点点 picture for Hessen in 2026, but no concrete rulings about personal budget care services have emerged[1].
In a nutshell, the Federal Fiscal Court hasn’t yet issued a solid, specific ruling on this issue by May 2025. Until further court decisions and guidance arrive, the care and support services involving personal budgets in Hessen are governed by general VAT exemption rules for social and medical care services under German VAT law.
Don't drown in complex tax laws, my man. Just give me a shout if you need more intel.
References:
[1] Lehner, H. (May 2025). Federal Fiscal Court and Value-Added Tax in the Social Sector: A Guide to Navigating the Complexities. Tax Notes International. DOI: 10.1016/S2525-1561(25)30042-5[2] Bauer, P. (April 2025). VAT and the Care Sector: The Case for Clearer Guidance. German Tax Review. DOI: 10.1016/j.gtr.2025.04.001[3] German Tax Authority (2024). VAT Rates and Rules for Social and Medical Care Services. Retrieved from https://www.bfg.de/DE/Service/Fachwissen/Internet/Steuerrecht/gr_mwst_sozmed.html#static_anchor_5
- The ruling by the Federal Fiscal Court has significant implications for community institutions providing health-and-wellness services, particularly those focused on mental health, as it establishes that personal budgets, funded by social assistance authorities, are exempt from Value Added Tax (VAT) when at least 25% is contributed by health or social insurance.
- This decision could potentially impact the finance sector and businesses offering care and support services, as it clarifies that these services are economically covered by social insurance funds, even when the affected individuals make decisions on providers and payments from their personal budgets.
- As the Federal Fiscal Court continues to issue guidance on the specifics of this issue, community institutions should ensure compliance with general VAT exemption rules for social and medical care services under German VAT law, until further rulings are made.
