Do you have to pay VAT on hospital bills?

Recently, this was a question we got from Australia. It appears that a number of patients were being treated in a hospital in Germany, and required to pay the official VAT rate of 19% on top of already high treatment bills.

German VAT is regulated ina law called "Umsatzsteuergesetz". Unfortunately the text is not available in English. Let us try to sumarize what it says about VAT and health care. There is a specific § 4 listing all exceptions to the rule that VAT has to be paid on all deliveries and services in Germany. Here, in section 14, it says:

• Treatments in human medicine, provided by physicians, dentists, practitioners, physiotherapists, midwwives or similar provideers of medical care is exempt.
• Hospital treatments and medical activities by physicians including diagnostics, anamnestics, prevention, rehabilitation, obstetrics and hospice services including all activities closely related to such treatments, if the are delivered by public institutions (institutions governed by public law) are exempt of VAT.
• This exemption is extended to all services delieverd by hospitals and health care centers that have an official accreditaion to serve social security patients, if the services are such as provided under the social security act.

So: Is it possible that you have to pay VAT on hospital services? Yes, but only if you opt to get treatment by an institution that is not affiliated to or accredited for the treatment of patients covered by social security.

As has been pointed out elsewhere, there are basically two definitions of a hospital in Germany. One is in business law, where § 30 Gewerbeordnung requires that anybody who wants run a private health care institution has to have a concession to do so (like the concession to run a bar.) And the second one is in § 108 of Book 5 of the social security act, where the requirements for participating in the provision of hospital services to social security patients are defined.

There is an increasing number of health care providers in Germany who opt out of the social security system, or are not accredited because they provide services which are not within the scope of social sercurity coverage. These institutions are entitled to call themselves hospitals if they have the concession under business law. But their services are not exempt from VAT, so patients have to pay additional 19% (currently).

German Hospital Service will generally not advise customers to consult such institutions as normally there is no need to go there. High level medical treatment can always be obtained by the fully accredited hospitals and most of the really high class institutions are “goverened by public law” anyway: They are the university clinics, universities in Germany being predominantly public institutions.