CJEU – Public health fund contributions decrease VAT base for pharmaceutical firms

On 6 October 2021, the Court of Justice of the European Union (CJEU) delivered its judgment in the Boehringer case involving Hungary. The judgment highlights that despite continuous changes, the Hungarian VAT Act still regulates the VAT treatment of discounts and allowances granted by the seller in a manner contrary to Community law.

The genesis of the case is the self-revision submitted by the Hungarian branch of the pharmaceutical company Boehringer Ingelheim (“Boehringer“). Boehringer submitted a self-revision to its VAT returns and reclaimed a significant amount of VAT because, in its view, it actually received less money for the social security subsidized medicines it sold on the Hungarian market than the state health insurance fund paid for the medicines. This is due to pharmaceutical companies’ obligation to pay for their sales of social security subsidized medicines. According to Boehringer, that obligation to pay effectively represents a discount since it actually reduces the purchase price received, with the result that Boehringer should not have had to pay VAT on the “discount” that it did not receive.

Source Baker & McKenzie

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