VAT treatment of services by debtor advisor – exempt?

A debtor advisor aiming for systematic profit is not exempt from value-added tax (VAT). The Niedersächsisches FG ruled that when assessing whether an establishment seeks systematic profit, all activities of the entrepreneur, including those as a lawyer and debtor advisor, must be considered. In a specific case, a self-employed lawyer providing debtor advisory services was denied the VAT exemption for such services by the tax authorities. The court concluded that the lawyer’s systematic profit-seeking behavior rendered him ineligible for the exemption. The court also emphasized that auxiliary personnel must fulfill the conditions for the exemption themselves. The decision has implications for sole proprietors and freelancers engaged in part-time debtor advisory services. However, exemptions under a different provision may be applicable to certain professions, such as attorneys acting as procedural representatives, educators, and child and adolescent psychologists serving as procedural advocates. The Bundesministerium der Finanzen (Federal Ministry of Finance) issued a recent decree confirming this possibility (BMF, letter of April 28, 2023, III C 3 – S 7183/19/10003:002). The case was decided by the Niedersächsisches FG on September 5, 2022, and the judgment has become final.

Source: haufe.de

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