The Provincial Administrative Court in Warsaw confirmed that the pharmaceutical company has the right to reduce the VAT base amount, and consequently the VAT amount, due to the payment of rebates to the National Health Fund (NFZ). The court said that not only a rebate, but every situation that causes a price reduction, which is what the seller ultimately gets from the sale, is the basis for reducing the VAT base amount. The NFZ is the ultimate consumer of medicines distributed by the company, although the purchasers of these drugs are hospitals and pharmacies, and the beneficiaries are patients. The fact that this part of the NFZ is discharged does not change the fact that, as a result, the company, from the amount it receives from wholesalers or hospitals, has to give certain amount to the NFZ (upon agreement), and as a result mathematically does not have the amount that has been shown on sales invoices. Therefore, the CJEU judgment of 20 December 2017 in case C-462/16 (Boehringer Ingelheim Pharma GmbH & Co.KG.) applies here. However, the Provincial Administrative Court in Warsaw is not the court of the highest instance in Poland, thus the case can still end up at the Supreme Administrative Court. So still some time until the final decision will be known.
The case concerned a pharmaceutical company that sells refunded medicines to wholesalers and hospitals. The official price of those medicines is defined in the decision of the National Health Fund (agreement between the NFZ and the pharmaceutical company). Of course, it is agreed by way of negotiations between the pharmaceutical company with the committee operating at the Ministry of Health, and then confirmed in the resolution of the commission and in decisions issued by the Minister of Health.
Attachments to those agreements between the NFZ and the pharmaceutical company also specify the so-called risk-sharing instruments. One of them states that the pharmaceutical company refunds the NFZ a part of the reimbursement amount received. In practice, the return means a price reduction for the company. On sales invoices issued to wholesalers and hospitals, it shows amounts for medicines at official prices, but end to end, the pharmaceutical company has less cash in hand out of the applied scheme.
As a matter of a fact, the dispute concerned the issue: How the company should correctly settle the VAT amount, and in particular – whether the inclusion of medicines sold by the risk sharing instrument causes a reduction of the VAT base amount?
The company believed that it had the right to reduce the VAT base amount by the refund amounts paid to the NFZ (upon agreement). The pharmaceutical company argued that an analogy should be made to indirect rebates provided by the seller not to the direct counterpart, but to the next entity in the supply chain (e.g. retailer).
The Provincial Administrative Court in Warsaw agreed with the pharmaceutical company. The judge in the case explained that the CJEU ruling of 20 December 2017 (i.e. C-462/16 Boehringer Ingelheim Pharma), applies here. As a result, the rebate granted on the basis of national legislation by a pharmaceutical company resulted in a reduction of the VAT base amount.
It is true that the base of this ruling dealt directly with rebates, but according to the Provincial Administrative Court in Warsaw the transfer of the CJEU’s thesis to the Polish ground, should be considered as if the agreement between the NFZ and the pharmaceutical company is one of the risk-sharing instruments, whereas in Germany, a different system of settlements is simply in place.
Thus, the Provincial Administrative Court in Warsaw decided that not only the rebate, but any situation in which the price is reduced (i.e. the amount that the seller ultimately receives from the sale) affects the VAT base amount.
The judge in the case added that although patients (e.g. hospitals) are the beneficiaries of medicines, the final consumer in this case is the NFZ – the aim of this national body is to make sure that medicines will go to hospitals and patients.
Additionally, the judge added that the company in the adopted model receives payment from wholesalers, hospitals or pharmacies, where part of the received payments need to be given back to the NFZ. As a result, the VAT base amount is reduced.
III SA/Wa 1831-33/18
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