In Boehringer Ingelheim RCV GmbH & Co KG Magyarorszagi Fioktelepe (C-717/19), the taxpayer was a pharmaceutical company that marketed state-subsidized drugs to wholesalers. The wholesalers in turn sold the drugs to pharmacies who sold them to patients. The Hungarian public health insurance body operated a “purchase price subsidy” system whereby it paid pharmacies part of the price of a medicine while patients paid the balance at the pharmacy. Pharmacies paid VAT on the sum of the amount paid by patients and the amount paid by the public health insurance body. In order to ensure that the drugs it distributed on the Hungarian market remain subsidized, the taxpayer has entered into “reimbursement agreements” with the public health insurance body committing to pay the body a defined percentage. of each grant for specific drugs. In some cases, once a “subsidy ceiling” was exceeded for the product in question, the amount was 100% of the subsidy. The “reimbursement agreements” gave the taxpayer a guarantee that his drugs would be subsidized. However, the law did not oblige to conclude the agreements.
The taxpayer argued that he should account for VAT on the amount for which he sold the drugs to wholesalers less the amount he paid to the public body. The Hungarian tax administration refused to allow the taxpayer to account for VAT on the reduced amount on the grounds that its national law required that any price reduction be part of its fixed conditions or be carried out for promotional purposes.
The court concluded, however, that by entering into the “repayment agreements”, the taxpayer effectively waived part of the consideration paid by the wholesaler. The price on which VAT was payable was therefore reduced within the meaning of the VAT Directive and the Hungarian legislation which required that the price reduction be part of the fixed conditions of the company or be carried out for promotional purposes was prohibited by the VAT Directive. . According to the court. In addition, the directive prohibited the Hungarian tax authorities from requiring an invoice to prove the price reduction; the principles of neutrality and proportionality require that the taxpayer be allowed to establish by other means that the price reducing transaction has taken place.
Comment from DLA Piper:
The conclusion of this lawsuit is particularly favorable to pharmaceutical companies which grant discounts to public health insurers. The tax authorities were reluctant to grant a reduction in the taxable amount in the Boehringer first instance (C-462/16) because, among other things, there was no legal obligation to pay the refunds. We see no legal basis for tax authorities to continue using this argument, given that the CJEU has confirmed that a (voluntary) contribution made under a contractual obligation should also result in a reduction in the taxable amount.