In a circular dated 14 April 2026, the Ministry of Finance of Mecklenburg-Western Pomerania clarified the conditions under which medical transport services provided by taxi and hire car operators are exempt from VAT or, at the very least, subject to the reduced rate of VAT. For businesses in this sector, this issue is of great practical relevance, as the distinction is not always clear-cut.
Tax exemption applies only to medically necessary specialist equipment
As a general rule, the transport of sick or injured persons in specially equipped vehicles may be fully exempt from VAT under Section 4(17)(b) of the Value Added Tax Act (UStG). The crucial factor here is whether the special vehicle equipment is medically necessary. If a patient can be transported without any problems using an ordinary taxi or hire car, the tax exemption does not apply, even if a specialised vehicle is used.
As proof, the tax authorities require a medical certificate stating that travel by conventional vehicle is not possible. Without this document, business owners risk having their tax exemption refused by the tax office.
Reduced tax rate for taxi journeys of up to 50 kilometres
Where the tax exemption does not apply, the reduced VAT rate of 7 per cent may be applied to taxi journeys of up to 50 kilometres in length (Section 12(2)(10)(b) of the German Value Added Tax Act (UStG)). Whether a return journey is to be regarded as a single transport service or as two separate transport services depends on the circumstances of the individual case.
In a judgement dated 31 May 2007 (case number V R 18/05), the Federal Fiscal Court ruled that a taxi passenger’s outward and return journeys are, in principle, regarded as two separate services. This applies regardless of whether the taxi waits for the passenger or is booked again for the return journey.
The situation is different for patient transport to hospital: if the driver waits there for the patient as agreed, the Federal Fiscal Court (BFH) has, in a ruling of 24 October 1990 (case number V B 60/89), recognised this as a single transport service. The Mecklenburg-Western Pomerania Finance Court has also confirmed this line of reasoning for dialysis journeys (judgement of 25 September 2001, case number 2 K 137/99).
Car hire companies: Special rule for medical transport
In principle, hire cars are not covered by the aforementioned regulation. However, there is an exception specifically for medical transport: if the car hire company has entered into a special agreement with a health insurance fund, the terms of which are similar to those of a corresponding agreement for taxi operators in the same geographical area, the reduced tax rate may also apply.
To facilitate proof of this similarity, the tax authorities presume it to be the case in situations where practical evidence cannot be provided. If, however, there is only an agreement specifically for car hire operators, the operator must themselves prove that a comparable agreement also exists for taxi operators in the same area. In the absence of such proof, the full standard tax rate applies.
What does this mean for business owners in practice?
Taxi and hire car operators who regularly provide transport for patients should keep their contractual documents with health insurance funds, as well as their patients’ medical certificates, in a safe place. The VAT treatment of individual journeys may vary depending on the terms of the agreement and the patient’s medical condition. If in doubt, it is advisable to consult a tax adviser to avoid unpleasant additional tax claims in the event of a tax audit.
Source: Ministry of Finance of Mecklenburg-Western Pomerania, Circular of 14 April 2026, reference number S 7244–00000-2026/001
Source: Haufe: Tax
This article was created with the help of AI and has been editorially reviewed.
