On June 6, 2024, the Advocate General (AG) at the Court of Justice of the European Union (CJEU) delivered an opinion in case C-248/23 involving Novo Nordisk AS. The case pertains to the ex lege contributions paid by the pharmaceutical company to Hungary’s state health insurance body, which subsidizes the retail sale of medicinal products in the country. The AG concluded that these contributions are effectively price reductions, entitling the pharmaceutical company to VAT refund rights.

Why is this important?

The ruling underscores that contributions and rebates within pharmaceutical value chains can result in VAT refund rights, offering significant benefits to pharmaceutical companies operating across EU Member States. This interpretation aligns with precedents set in earlier EU VAT cases, such as Boehringer I, Boehringer II, and Firma Z, which confirmed the conditions for such VAT refund potential from an EU perspective.

Additionally, these cases provide clear guidelines on VAT and pricing agreements within pharmaceutical value chains, helping to prevent commercial disputes among parties and VAT-related conflicts with tax authorities.

Recommended actions

Pharmaceutical companies should take proactive steps to understand the implications of the EU VAT cases. Key actions include:

• Assess VAT Refund Potential: Evaluate the potential for VAT refunds on contributions and rebates.
• File Retroactive Claims: Learn how to file retroactive VAT refund claims across EU Member States.
• Timely Filings: Ensure timely filing of such claims.
• Commercial Agreements: Determine what to agree upon with partners in the value chain regarding VAT and pricing.
• ERP System Integration: Ensure that contributions and rebates are accurately processed through ERP systems to generate compliant VAT invoices and VAT return reports.

Benchmarking the AG opinion against your current situation can help determine the potential impact and necessary steps to take, while awaiting the CJEU’s final ruling (date currently unknown).

For further discussion on how EU VAT impacts your business, please contact Andy van Esdonk or your regular Bird & Bird contact.