On September 12, 2024, the Court of Justice of the European Union (CJEU) delivered a ruling in a case involving Novo Nordisk AS (C‑248/23). The case is about ex lege payments made to Hungary’s state health insurance body, which helps subsidize the cost of medicines in the country. The CJEU concluded that these payments are essentially price reductions, which means the pharmaceutical company has VAT refund rights.

Why is this important?

This ruling is important because it shows that contributions, discounts and rebates within pharmaceutical value chains could lead to VAT refunds. This is good news for pharmaceutical companies operating in the EU, as it could result in financial benefits making healthcare more affordable and accessible. The interpretation in this case is in line with previous EU VAT cases, such as Boehringer I, Boehringer II, and Firma Z, which also confirmed the conditions for VAT refund potential.

Additionally, these cases provide clear guidelines on VAT and pricing agreements within the pharmaceutical industry, helping to avoid commercial disputes among companies and VAT disputes with tax authorities.

Recommended actions

Pharmaceutical companies should take the following steps to understand the impact of this ruling for their business:

• Assess VAT refund potential: evaluate the potential for VAT refunds on contributions, discounts and rebates.
• File retroactive claims: learn how to file retroactive VAT refund claims across the 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, and update existing agreements where needed.
• ERP configuration: ensure your systems accurately process these payments to generate correct VAT invoices and VAT return reports.

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