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Primary health units (PHU) to ensure medical care?

Tax News - 10 Mar 2023 | 8 minutes read

Already since 2017, the Primary Care Act (Primärversorgungsgesetz) has enabled the formation of so-called primary health units and thus new forms of multiprofessional and interdisciplinary cooperation between health and social professions. Especially the current cost developments, the challenges of staff shortages and finally questions of personal life planning could speak for establishing companies in the medical sector.

In Austria – as in many other European countries – the strengthening of primary care is one of the essential health policy projects for the sustainable orientation of health systems. The aim is to promote health, strengthen prevention and ensure high-quality and efficient health care.

Against this background, the legal basis for strengthening primary care in Austria was created in 2017 with the Primary Care Act (Primärversorgungsgesetz, PrimVG), Federal Law Gazette I No. 131/2017. The focus was and is on the principle of structured cooperation between health and social professions within the framework of primary health units (PHU), specifically in “primary health centres” (PHC) or “primary health networks” (PHN).

In order to further promote the expansion of primary care in Austria, the Federal Ministry of Social Affairs, Health, Care and Consumer Protection (BMSGPK) has initiated the project “Attractiveness and Promotion of Primary Care”, which has a budget of EUR 100 million within the framework of the EU Recovery and Resilience Facility (RRF), which also provides funding.

PHUs can be an attractive professional environment for doctors in many respects. The following is an overview of the legal and fiscal aspects of PHUs.


Legal aspects of the primary health unit

An individual care concept must be developed for each PHU. In particular, the health care objectives, the range of services and the organisational structure and workflow are to be presented. The care concept is the basis for the binding and structured cooperation of all team members of the PHU and is the basis for the application for a primary care contract with the competent health insurance providers.

Each PHU consists of a core team, which includes at least general practitioners, one or more members of the higher service for health care and nursing and office assistants. In addition, other members of the health and social professions are to be involved depending on location and need. Decisive for the type and number of professional groups represented and the required qualifications are the respective regional requirements and the required scope of services.

The primary health unit must have its own legal personality, must be mapped in the respective Regional Health Structure Plan (RSG) and must have a primary care contract based on the principle of benefits in kind with the relevant health insurance providers, whereby the Austrian Health Insurance Fund must be the contractual partner of the PHU.

Depending on the local circumstances, a PHU can be set up at one location (PHC) or as a network at several locations (PHN) according to the type of primary care and be managed in the respective permissible legal form in accordance with the legal provisions. The professional provisions of the Ärztegesetz (ÄrzteG 1998) on the establishment of “group practices” or the Kranken- und Kuranstaltengesetz (KAKuG) restrict the free choice of legal form, so that the following legal forms can be considered for PHUs:

  • Group practice as a limited liability company (GmbH)
  • Group practice as a general partnership (OG)
  • Association Cooperative
  • Independent outpatient clinic

The shareholders of the GmbH or OG must be exclusively professionally certified physicians. Group practice GmbHs and OGs can themselves be legal entities of a PHU. Associations and cooperatives, on the other hand, can only be used as supporting organisations for the operation of a primary care network (PHN); their members (physicians) are therefore (still) independent in their professional practice.

PHUs at one location can in principle also be set up in the form of an independent outpatient clinic pursuant to section 2 (1) No 5 or section 3a ff KAKuG. However, the PrimVG restricts this possibility to the extent that only

  • non-profit providers of health or social services,
  • statutory health insurance providers,
  • regional authorities or
  • corporations and funds set up by regional authorities

may be shareholders of PHUs in the form of an independent outpatient clinic. Accordingly, the establishment of a PHU outpatient clinic for self-employed physicians is not possible by law.


Tax aspects

Income tax issues

From an income tax perspective, the distinction between a PHU at one location (PHC) and a primary care network (PHN) is not important. Rather, it depends on the legal form chosen and the assets (essential business assets, patient stock) of a company or legal entity. The respective legal form determines the taxation regime of the current taxation. The PHU-Gruppenpraxis-GmbH enables a shorter refinancing period for investments with the retention of profits and in view of the resulting lower income tax burden. The PHU-Gruppenpraxis-OG allows a high degree of flexibility in the structuring of the remuneration of the partners.

From a tax point of view, it is important that PHUs (regardless of whether PHC or PHN) can be formed from already existing operational units, i.e. doctors’ practices, because the essential feature of a PHU at one location is the association of several doctors to form a group practice. The same applies to a primary health network (PHN) if the path of a dislocated group practice is chosen. In any case, this has the consequence that assets – namely the operation of an existing doctor’s practice – must be transferred to the joint company, unless a completely new company is founded.

Formation of PHU: For income tax purposes, asset transfers are basically tax-effective realisation transactions, which – since a sale of the individual business to the group practice is assumed – result in the taxation of the hidden reserves and the goodwill (patient base), although the group practice can depreciate the goodwill acquired in this way over 15 years (provided the transferring doctor continues to work) with tax effect.

As a rule, it is therefore advisable to transfer the practices in a way that does not affect income tax, applying the tax provisions of the Reorganisation Tax Act (merger or contribution according to the Reorganisation Tax Act, UmgrStG) and taking into account the specific features of medical businesses under professional law.

Dissolution/separation of PHUs: A later separation of PHUs, their dissolution or a withdrawal of physicians can also be carried out in an income tax-neutral manner by means of reorganisation (real division or demerger according to UmgrStG). This presupposes the existence of a business or partial business. The latter is conceivable in the case of a dislocated group practice or also in the primary health network (PHN); in the case of a PHU at one location, on the other hand, the partial business status will not be presentable. In the case of a demerger, the special feature under professional law must also be taken into account that a group practice GmbH must have at least two physicians as shareholders, which could possibly result in the requirement of a multiple move for reorganisation tax purposes (establishing conversion to OG and real division according to UmgrStG).

Value added tax issues

A PHU can be set up at one location or as a network at several locations. If it is a primary health network (PHN) with a legally separate supporting organisation, special VAT issues have to be considered in comparison to a PHU group practice and a PHN as a dislocated group practice. Central questions regularly concern the exchange of services, VAT exemptions and, in connection with this, the deduction of input tax.

Primary health unit group practice (Gruppenpraxis): Both a PHU-Gruppenpraxis-OG and a PHU-Gruppenpraxis-GmbH qualify as entrepreneurs under the VAT Act. The exchange of services takes place between the social insurance institutions and the PHU group practice. From a VAT perspective, the medical services are provided to the social insurance institutions by the respective company (OG or GmbH) and not by the participating doctors. Consequently, the doctor does not participate in this exchange of services for VAT purposes.

In view of the neutrality of the legal form of the tax exemption, the tax exemption of section 6 (1) no. 19 UStG also applies to group practices. Consequently, both the PHU-Gruppenpraxis-OG and the PVE-Gruppenpraxis-GmbH fall under the exemption of section 6 (1) no. 19 UStG with regard to the turnover from medical treatment in the field of human medicine. If a group practice also carries out sales that are not exempt from VAT, these are subject to VAT – unless the small business regulation applies.

The taxation of a PHU-Gruppenpraxis-GmbH takes place according to the received remuneration (actual taxation), since this company, as a company licensed under professional law, provides services that correspond to liberal professional activity as defined in section 22 EStG.

Primary care health network: Since PHUs can also be designed as primary care networks (PHN) at several locations, this results in two possibilities:

  • PHN as a dislocated group practice within the meaning of section 52a (4) ÄrzteG
  • PHN with legally separate supporting organisation

With regard to a PHN as a dislocated group practice, reference is made to the explanations on the primary health unit group practice above, since the design as a network does not entail any further special features for VAT purposes.

If, on the other hand, the PHN has a legally separate supporting organisation, specific VAT peculiarities must be taken into account, which in practice become important for VAT purposes, especially in the primary health network (PVN) with associations as supporting organisations. In any case, this requires a detailed, in-depth examination of the respective circumstances.