Medical Supply Retailers (Sanitätshäuser): Tax and Accounting Pitfalls, and What the 3% Reduction Changes Starting in 2027

For flat-rate supply fees, the right to use the equipment is generally the principal service. Maintenance, repairs, and returns follow its VAT rate as ancillary services. If service components are priced separately, the arrangement may need to be split into multiple services subject to different VAT rates. Contracts, invoices, and pricing should therefore be aligned. Patient co-payments and additional charges form part of the consideration and follow the VAT rate of the principal service.

An incorrect VAT rate can trigger substantial assessments. For example, if repairs and compression services with annual net sales of EUR 250,000 are invoiced at 7% rather than 19% for four years, approximately EUR 120,000 in VAT, plus interest under Section 233a of the German Fiscal Code (AO), would be payable. A claim against statutory health insurers often fails because of billing deadlines. The item master data should therefore be systematically reviewed for the correct customs tariff heading and VAT rate.

From 2027, e-invoicing will also become more important. Point-of-sale business under Section 302 of Social Code Book V (SGB V) and invoices to insured persons are not affected. The critical issue is incoming invoices: manufacturers, wholesalers, and purchasing cooperatives with prior-year turnover exceeding EUR 800,000 must issue e-invoices from 2027. From 2028, this requirement applies to all businesses (Section 27(38) UStG). If a PDF is received instead, the invoice does not meet the requirements of Section 14 UStG, putting the input VAT deduction at risk.

Revenue Recognition: No Revenue Without Approval

Revenue is recognized when the promised service has been performed and collection of the receivable is virtually certain (Federal Fiscal Court (BFH) decision dated March 23, 2011 - X R 42/08). If the claim depends on approval by the statutory health insurer, it generally may not be recognized until approval is granted (BFH decision dated June 13, 2013 - X B 27/12).

For typical supply models, the recognition points are as follows:

• Supply without approval: Revenue is recognized when the medical aid is delivered.
• Supply requiring approval: The insurer’s approval is determinative. Revenue is recognized no earlier than delivery.
• Custom-made product: Revenue is recognized only upon acceptance and approval. Until then, it is work in progress.
• Flat-rate supply fee: Revenue is recognized ratably from the start of supply, but no earlier than the date approval is granted.

If the medical aid reaches the patient before approval (advance supply), this is not yet revenue. Under a sale model, it remains in inventory until approval, measured at cost or, if rejection is foreseeable, at the lower value (Section 253(4) of the German Commercial Code (HGB)). Delivery and instruction are selling expenses and may not be capitalized (Section 255(2) sentence 4 HGB). Whether a supply requires no approval depends on the applicable insurer contract. A maintained approval matrix prevents premature recognition of a receivable. For standard products with a rejection rate close to zero, tax auditors may require earlier recognition.

Flat-Rate Supply Fees: Measure Deferrals Realistically

Not every supply runs for the full term. Insured persons may die, move into a nursing home, or no longer need the medical aid. If the insurer contract does not provide for a pro rata reimbursement, the obligation to provide services ends earlier, and the amount collected remains with the medical supply retailer. The deferred income balance can be reduced accordingly. An estimate is permissible if based on generally applicable criteria (BFH decision dated July 26, 2023 – IV R 22/20). Return rates should be derived from actual data for each product group, updated annually, and applied consistently. Cut-off accounting and provisions must follow the same logic. For tax purposes, individual receipts of up to EUR 800 may be excluded from the deferral requirement (Section 5(5) sentence 2 of the German Income Tax Act (EStG)).

The 3% Reduction and Insurer Deductions Reduce Consideration

The statutory reduction is not an expense item. It reduces the reimbursement to be collected, deferred, and taxed. The relevant date is the start of supply, not approval or payment. If the reduced flat-rate fees no longer cover costs, a provision for onerous contracts must be recognized under German commercial law (Section 249(1) sentence 1 HGB); tax law does not recognize it (Section 5(4a) EStG). This creates deferred taxes.

The same applies to deductions/claw-backs by statutory health insurers during billing reviews under Section 302 SGB V. Final deductions are reductions of revenue, not other operating expenses. Expected reductions must be reflected in measuring receivables from statutory health insurers. Provisions should be assessed for announced claw-backs. If consideration is finally reduced, VAT must be adjusted under Section 17(1) UStG.

2026 Year-End Financial Statements: What to Do Now

• Document the start of supply: Supplies that began in 2026 remain subject to the unreduced reimbursement, even if approval follows in 2027. Delivery, date, and receipt confirmation must align.
• Ensure loss-free measurement: Work in progress and advance supplies starting in 2027 must be measured taking the reduced reimbursement into account.
• Test recoverability: Forecasts for goodwill, pool equipment, and equity interests must reflect the reduction and capped price increases.
• Update deferred taxes: The phased reduction in corporate income tax starting in 2028 must be reflected using the rates applicable when the temporary difference reverses (Section 274(2) HGB).
• Supplement the management report: The effects of the Act belong in the forecast and risk report (Section 289(1) sentence 4 HGB).

Conclusion

The reimbursement reduction starting in 2027 will narrow medical supply retailers’ room to maneuver. Tax and accounting inaccuracies will therefore carry greater weight. Reliable tax returns, annual financial statements, and a later business valuation require the item master data to be checked for the correct VAT rate, revenue to be recognized only upon approval, flat-rate supply fees to be deferred realistically, and reductions and deductions to be recorded as reductions of revenue. The 2026 year-end close is the right opportunity to implement these measures.