Facts
The law firm partnership, consisting of lawyers [A.] , [B.] , [C.] , [D.] and [E.] , was retrospectively registered as a taxable simple partnership in the VAT register by the Federal Tax Administration effective 1 January 1995. The partnership had jointly procured office supplies, professional literature, personnel and office premises, and allocated the costs proportionately among the individual lawyers. The Federal Supreme Court confirmed the VAT liability of the law firm partnership, as it had acted as a collective of persons without legal capacity and provided services for consideration. There was no direct agency relationship between the partnership and the individual lawyers.Considerations
The Federal Supreme Court stated that the law firm partnership should be classified as a simple partnership, as it pursued a common purpose - the cost-effective maintenance of the infrastructure required for a law firm partnership - and provided the necessary funds for this purpose. The decisive factor for the tax liability was that the partnership acted externally and provided services for consideration, regardless of whether a simple partnership existed under civil law. The Federal Supreme Court also denied the existence of a direct agency relationship between the law firm partnership and the individual lawyers, as the partnership had regularly acted in its own name and had not expressly acted in the name and on behalf of the lawyers.…