Medicine-related subsidies paid to health insurance company treated as price reduction for VAT purposes

The Court of Judgment of the European Union (CJEU) issued a judgment in a case (Boehringer Ingelheim C-717/19) concerning whether for value added tax (VAT) purposes, contributions paid to an insurance company for subsidized medicines constitute a reduction in the invoiced price. The CJEU upheld a prior determination that in such instances, the insurer is in the position of the final consumer vis-à-vis the supplier and that the payment of contributions calculated from revenues derived from medicines sold would result in a subsequent reduction in the tax base. The supplier, therefore, would be entitled to reduce the originally declared tax base, since the price had been reduced.

Source: KPMG