A blog about local and foreign VAT matters, best practices, and tips from practioners.

On 20 December 2017, the European Court of Justice (ECJ) passed a judgment concerning whether Boehringer Ingelheim Pharma should adjust their VAT payment based on the statutory rebates paid by them to private health insurance companies.


Case Summary

As per German legislation, pharmaceutical manufacturers must grant rebates on products after they are supplied. The rebates are granted to both public and private insurers. However, the tax authorities in Germany, do not allow the pharmaceutical companies to reclaim the VAT paid on the rebate to private insurers.

On July 2017, the Advocate General published an opinion that taxpayers should be allowed to adjust their output VAT when giving rebates to the public as well as private insurers.

However, the CJEU decided that Boehringer should not account for VAT on more consideration than it actually received. The judgment means that it should be possible to adjust VAT on the rebates which have to be paid to third parties by law.

Pharmaceutical companies, having a statutory obligation to give rebates to the various parties, should start investigating the potential opportunities.

Click here for the detailed proceedings of the court


How does this affect your business?

As a result, pharmaceutical companies can get a VAT refund on rebates made to public and private companies. This scheme can be applied to older transactions and companies can get VAT refunds on rebates whilst the statute of limitation is open. Note additional  criteria may apply according to the specific conditions of each rebate.