How to apply VAT for medical services or medical replacement services?

What are the conditions for applying the exemption from medical benefits?

In order to benefit from this exemption, certain conditions must be met.

Persons affected by the exemption

First of all, the services must be provided by the following persons:

• doctors (general practitioners or specialists), dental surgeons, midwives, as well as by members of regulated paramedical professions (masseurs-physiotherapists, pedicures-podiologists, nurses, nurses, orthoptists, speech therapists, etc.);

• pharmacists;

• practitioners authorized to legally use the title of osteopath, chiropractor, psychologist or psychotherapist;

• psychoanalysts who hold one of the diplomas required, at the date of its issuance, to be recruited as a psychologist in the public hospital service.

The exemption therefore depends on the quality of the service provider. Some medical service providers who do not have these statuses cannot therefore charge exempt from VAT.

Exempt benefits

The exemption applies to services provided by doctors, or providers referred to above, as well as to sales of goods that are a direct extension of care. In particular, one can think of orthopedic insoles billed by an orthopedist to his patients.

On the other hand, the VAT exemption does not extend to income derived from an activity that is not related to the care provided to patients. Thus the sale of prostheses or orthopedic articles to persons to whom the practitioners did not provide care is subject to VAT.

Expert point of view: the rental of furnished premises carried out by a doctor to his colleagues is subject to VAT.

Thus, a doctor who owns a medical office and who wishes to rent part of his premises to colleagues will have to apply VAT to these premises. This is logical because the doctor does not exercise a medical profession here at all but an activity as a lessor of equipped premises.

This VAT will be a burden for his colleagues who will not be able to deduct it because of their therapeutic activity as doctors.

On the other hand, the fact that the doctor charges VAT on the provision of his premises will allow the “lessor” doctor to deduct part of the VAT borne on his purchases.

Indeed, as a reminder, input VAT is deductible when output services are subject to VAT.

With regard to the medical benefits which are affected by the exemption, the Court of Justice of the European Union provided details in judgments of 20 November 2003 (CJEC, judgment of 20 November 2003, aff. C-307/01 Peter d'Ambrumenil, ECLI:EU:C: 2003:627 and CJEC, judgment of 20 November 2003, case C-212/01 Margarete Unterpertinger, ECLI:EU:C: 2003:625).

The CJEU specified that only therapeutic services, understood as those carried out with the aim of preventing, diagnosing, treating and, as far as possible, curing, including preventively, diseases or health anomalies are likely to benefit from VAT exemption.

These details are important because they mean that acts that do not have a therapeutic purpose cannot benefit from VAT exemption. For example, this may be certain acts of comfort.

This precision is particularly relevant for cosmetic surgeons who sometimes perform reconstructive surgery procedures that are reimbursed by Health Insurance and sometimes acts of pure cosmetic surgery that are not reimbursed by Health Insurance.

When they are not fully or partially covered by Health Insurance, medical and cosmetic surgery procedures whose diagnostic or therapeutic value has been recognized in the opinions issued by the competent health authority referred to them as part of the procedure for registering in the nomenclature of professional acts covered by Health Insurance are also eligible for VAT exemption.

This distinction can sometimes lead to difficulties in terms of the burden of proof. It is therefore appropriate for cosmetic surgeons to justify operation by operation if it has received a partial reimbursement from Health Insurance or at least to indicate whether the act in question is of recognized diagnostic or therapeutic interest in the opinions issued by the competent health authority.

We can then see that medical confidentiality can sometimes come up against the tax administration's quest for truth...

VAT rules applicable to the replacement of doctors

It is common for a doctor to seek the services of a colleague to provide an alternative service.

It is worth considering which VAT regime is applicable to this type of situation.

In its doctrine, the tax authorities consider that the amounts paid by the replaced doctor to the replacement doctor at the end of the replacement contract are exempt from VAT as long as they pay for the care provided by a practitioner to a patient.

The terms of payment of these amounts (not by the patient himself but by the replaced person to the substitute) do not change, in terms of VAT, the nature of the service provided in return.

On the other hand, the fee received by the replaced doctor in return for making his technical installations and premises available to the replacement doctor, who does not pay for the provision of personal care, is subject to VAT, unless the replacement is of an occasional nature.

In other words, the tax authority wants to distinguish between two things:

• the remuneration of the substitute physician in respect of his care activity;

• the remuneration of the doctor replaced for the provision of his furnished premises. Indeed, as indicated above, the rental of premises by a doctor to a colleague is subject to VAT. As a measure of tolerance, the tax administration accepts that this fee is also exempt from VAT in the event of a temporary replacement.

It is in particular on this occasional nature that the Paris Administrative Court of Appeal recently had the opportunity to discuss (June 28, 2024, 23PA0010).

The judges considered that substitutions of one or more half-days per week for several months in a row could not be considered as occasional substitutions.

This means that the fraction of the fees retained by the replaced doctor was the remuneration for providing furnished professional premises subject to VAT. The judge therefore reclassified the operation.

Let's talk about numbers:

The “replacement” doctor received 17% of the fees paid. This sum represents a part of the consultation billed to the patient; it is exempt from VAT at the level of the “substitute” doctor.

With regard to the 83% that were retained by the “replaced” doctor, this sum had to be subject to VAT at the rate of 20% because it represented the remuneration for the provision of the premises.

This is a major blow for the “replaced” doctor who sees the tax authorities apply 20% on the amounts retained. The only good news is that the replaced doctor therefore has an activity that is partially subject to VAT (the rental of his premises) and that he can partially deduct the VAT borne on his purchases for the needs of his activity (purchases of equipment, work, etc.).

It is also a major blow for the replacement doctor who is charged VAT on the provision of the premises of the replaced doctor. However, for him, this VAT is not deductible. It is a burden.

This judgment, which should be monitored if it gives rise to a decision by the Council of State, reiterates the importance for a doctor to determine the elements that allow him to consider that a replacement is occasional.

Indeed, it can be seen that the administration does not hesitate to disqualify an occasional contract in the light of the facts of the case in order to manage to apply VAT on the provision of premises and to abolish the exemption.

A judgment that could have serious consequences for this sector for which VAT is a burden and in which very many young doctors choose to exercise their activity almost exclusively in the form of replacements that can hardly be qualified as occasional in view of the criteria identified by the tax authorities and by the judge. The tax treatment could differ in the event that the products resulting from the consultation are directly apprehended by the replaced doctor under a mandate contract. In this context, any invoice would be issued by the replacement doctor for the benefit of the replaced doctor (equivalent to a retrocession of fees).

A case to be followed very closely!

‍