The Tax Court has ruled that a partnership that enters into cooperative arrangements with attorneys does not engage in „independent“ freelance work if the affiliated attorneys independently acquire and handle cases without the firm’s partners being professionally involved in advising on or handling those cases. This lack of personal professional involvement results in the partnership’s income from these cases being reclassified under the so-called „spillover rule“ and therefore subject to trade tax as commercial income.
The key issue is the interpretation of „acting on one’s own responsibility“ and „leadership role“ as defined in the job description under § 18 of the Income Tax Act (EStG). The court found that, without substantial evidence of direct legal activity on the part of the partners, it cannot be asserted that the income results from the required professional autonomy. This applies even if the external attorneys possess the same professional qualifications as the partners. The formal contractual structures and the internal organization of the partnership also underscored the separation of responsibilities between the partners and the so-called „associated partners,“ who were viewed more as independent entrepreneurs than as employees of the firm.
During the court proceedings, the distinction between the activities of the partnership and the work of the cooperating attorneys was analyzed in detail. It was demonstrated that the legal structure and practical implementation of the collaboration are fully consistent with the case law of the Federal Fiscal Court (BFH). Consequently, the partnership was correctly classified as a commercial enterprise. This decision thus reinforces the legal criteria regarding the practice of a liberal profession, personal responsibility, and the tax implications of professional collaborations.
Note: An appeal has been filed against this decision, which is pending before the Federal Fiscal Court (BFH) under case no. VIII R 12/25. Proceedings in similar situations should therefore remain open.