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EU value added tax refund potential for pharmaceutical companies


A recent opinion by the Advocate General (AG) for the European Court of Justice (ECJ) opens the door for pharmaceutical companies to potentially claw back previously charged value added tax (VAT). The case under consideration is Boehringer Ingelheim Pharma GmbH & Co. KG (case C-462-16) (Boehringer).

In essence, the case concerns whether retrospective discounts payable by Boehringer to a party that is not a customer of Boehringer can be offset against the value of the original supply such that the amount of VAT charged can be reduced. So by example, Boehringer supplies product to an intermediate wholesaler and charges VAT on the value of that sale. The wholesaler, in turn, supplies product to an end consumer. The price payable by the end consumer is discounted and Boehringer funds the discount through rebating amounts directly to the end consumer.

The AG has confirmed that the rebate can be taken into account when determining how much VAT to account for on the original supply to the wholesaler.

In Boehringer’s case the specific circumstances concerned a statutory requirement to make the rebate, but the opinion indicates that this does not necessarily need to be a pre-condition.

Given that this is an ECJ case, the outcome of which will have application in all 28 member states of the EU, there is a possibility that similar rebates made available in any one of the member states could be offset against the value of the original supply.

Pharmaceutical companies that consider they may have similar facts, and therefore a potential reclaim opportunity, should speak to their tax advisors in order to evaluate and pursue a claim. It should be noted that each member state sets its own statute of limitations, but there could nonetheless be a possibility of making claims for a number of prior years. The final judgment has not been handed down, but in order to protect earlier accounting periods, companies should consider submitting protective claims.

Duncan Stocks


Duncan leads the VAT consulting practice, advising clients on the technical and compliance aspects of their global transactions. Reach him at duncan.stocks@rsmus.com

Areas of focus: Global Value Added Tax

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