How will the new ECJ-case Boehringer Ingelheim impact on pharmaceutical companies that provide discounts to public and/or private entities in Norway

Fiscal neutrality and proportionality are the most crucial core features in the VAT system. The ECJ has reconfirmed this in a recent court case, C-717/19, by its rationale in the final judgment by confirming that “the amount collected by the tax authorities must not exceed the amount paid by the final consumer, i.e., member states are obliged to reduce the taxable amount in all cases where the taxable person does not receive the whole or part of the consideration after the transaction has been completed”.

This ECJ decision has left its mark in the EU and will likely result in millions of VAT savings for pharma companies. 

We agree with the ECJ assessment in this case, and this is also in line with what has been stated by the Directorate of taxes in Norway with regards to discounts provided in chains of sales.

We expect that this judgment should be relevant to - and may create opportunities for - pharmaceutical companies that conduct business in Norway and are part of a discount arrangement with a public or private entity. Many pharmaceutical companies are, for instance, partaking in the “Blåresept” prescription scheme administered by Helfo. We recommend that such pharma companies should take a closer look at how the discount is currently handled for VAT purposes.

We recommend that pharma companies that supply pharmaceuticals in Norway and offer retrospective discounts to public and/or private entities review their VAT accounting procedures and assess how the ECJ court case might benefit their VAT position in Norway.

Summary of the case

The Boehringer Ingelheim ECJ case concerns a Hungarian subsidiary of Boehringer Ingelheim and the subsidiary's agreement with the National Health Insurance Fund Management (NEAK) to sell subsidized medicine to wholesalers in Hungary. 

The wholesaler resells the medicine to the pharmacies in Hungary, which in turn resells it to private patients covered by the NEAK. The patient pays a proportional amount for the medicine to the pharmacy - here the difference between the price of the product and the funding provided by social security-, and the rest of the payment will be covered directly by NEAK to the pharmacy as social security funding. This scheme is pretty much like the blue prescription scheme (“blåresept”) we have through Helfo in Norway. 

NEAK will in practice claim for a repayment (discount) from the pharmaceutical company that is part of this scheme (here The taxpayer). The taxpayer will also as a result of that need to use  part of the payment received from the wholesaler to pay NEAK. As a result of the arrangement, the total VAT liable revenue was hence reduced for The taxpayer, see illustration below.
In this particular case, The taxpayer filed a supplementary VAT return to the tax authorities to correct the VAT basis by reducing it in line with the discount. However, the Hungarian tax authorities declined the request and were of the view that The taxpayer has not provided sufficient evidence (audit trail) to support the reduction. More specifically, they argued that:

1. 1. The price reduction cannot be granted as this was not part of The taxpayer’s terms of business or a business promotion, and
   2. There was no credit invoice issued to support the reduction.

The case was brought into the ECJ, and the ECJ voted in favor of The taxpayer. ECJ also pointed out in its assessment that a reduction shall as a starting point be granted if the taxpayer, in the end, has not received all or part of the consideration for its supplies. 

Furthermore ECJ also explicitly stated that “the amount collected by the tax authorities must not exceed the amount paid by the final consumer, i.e Member States are obliged to reduce the taxable amount in all cases where the taxable person does not receive the whole or part of the consideration after the transaction has been completed”. Which will have been the case here if The taxpayer is not granted with the reduction. 

Regarding the proof, it is not necessary to provide invoice/credit notes to prove that the VAT basis has been reduced. This can be verified by other evidential documents, like bank statements, agreements, etc. In this respect, the ECJ voted in favour of The taxpayer and granted The taxpayer to reduce the amount retroactively due to the discount arrangement with NEAK.  

Please find attached the link to the ECJ judgment (C-717/19)


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For further information on this case and how this case might impact your business, please feel free to contact us for a further discussion.