ECJ C-462/16 – Boehringer Ingelheim Pharma GmbH & Co. KG – Judgment – Discounts reduce the VAT value of pharmaceutical supplies

On December 20, 2017, the ECJ issued its decision in the case C-462/16 – Boehringer Ingelheim Pharma GmbH & Co. KG. This relates to discounts reducing the taxable amount granted to medical insurance funds.

Context: Reference for a preliminary ruling — Taxation — Value added tax (VAT) — Directive 2006/112/EC — Article 90(1) — Reduction of the price under conditions determined by the Member States — Reduction of the taxable amount — Principles laid down in the judgment of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400) — Discounts granted to private medical insurance funds

Summary

Context of the Case: The case involves a preliminary ruling request from the Bundesfinanzhof (Federal Finance Court, Germany) regarding the interpretation of Article 90(1) of the VAT Directive (2006/112/EC) in relation to VAT obligations of Boehringer Ingelheim Pharma GmbH & Co. KG, specifically concerning discounts granted to private medical insurance funds.
Legal Provisions Considered: The Court examined several key provisions of the VAT Directive, including Articles 73, 78, and 90. Article 90(1) mandates a reduction in the taxable amount in cases of price reductions after the supply of goods or services, while Article 73 defines the taxable amount as everything constituting consideration received for the supply.
Key Findings: The Court concluded that the statutory discounts granted by Boehringer Ingelheim to private health insurance companies, which reimbursed insured individuals for medicinal products, should be treated as a reduction in the taxable amount for VAT purposes. This aligns with the principles established in the earlier Elida Gibbs case, which emphasized the importance of neutrality and equal treatment in VAT matters.
Implications for VAT Treatment: The Court ruled that since part of the consideration (the discount) was not received by the pharmaceutical company due to the statutory requirement to provide discounts, this should result in a corresponding reduction of the taxable amount. Therefore, the VAT owed could not exceed the amount actually received by Boehringer Ingelheim, reinforcing the principle that the taxable amount should reflect the actual consideration received.
Conclusion: The Court’s ruling underscores the necessity for equal treatment under EU law, affirming that discounts mandated by law for private health insurance should be recognized similarly to those for statutory health insurance, thereby ensuring that pharmaceutical companies are not disadvantaged in their VAT calculations.

Articles in the EU VAT Directive

Article 90(1) of Council Directive 2006/112/EC

Article 90 (Taxable Amount)
1. In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.

Facts

The applicant is a pharmaceutical company that produces pharmaceuticals and supplies them via wholesale to pharmacies. The pharmacies supply compulsory insured persons and health insurance funds. The health insurance funds receive a discount; the applicant must then compensate the pharmacies for that discount. The tax authorities (defendant) treat this discount for VAT purposes as a reduction of the compensation. The pharmacies also supply private insured persons. The private health insurer is not a purchaser of the medicines, but reimburses the costs. In that case too, the applicant must give a discount on the price of medicines, but that discount is not recognized by the defendant for VAT as a reduction in the reimbursement. Since the applicant did include the latter discounts in the tax return (in 2011), the defendant establishes an amended VAT statement. The applicant’s objection is rejected, but her appeal is upheld. The defendant then files a ‘revision’ with the referring court.

The referring DUI court (Bundesfinanzhof) points to the ‘chain of acts’ in the judgments of the CJEU (C-317/94 and C-300/12) in which in the latter judgment the Court held that in case of a discount initiative intervening (legal) person (in this case the travel agency) the taxable amount should not be lowered. In the present case, the private health insurer is not a link in the supply chain between the applicant and the final consumer. The referring court sees an infringement of the principle of equal treatment for which there does not appear to be an objective justification. The purpose of the discounts is the same in both cases: to contribute equally to a reduction in the burden for the bodies that ultimately bear the costs of the pharmaceutical supply. The difference is limited to the technical modalities of the discounts and arises from the different statutory regulations for private and statutory health insurance. The CJEU has previously ruled that there is no basis for a difference in treatment based on legal form (C-376/08).

Questions

Has a pharmaceutical company that supplies medicines, in view of the case law of the Court of Justice of the European Union (judgment of 24 October 1996, Elida Gibbs, C-317/94, EU: C: 1996: 400, ECR 1996, p. I-5339, paragraphs 28 and 31) and to the EU law principle of equal treatment, right to a reduction in the taxable amount in accordance with Article 90 of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax where
– the company supplies these medicines to pharmacies through a wholesaler,
– the pharmacies make taxable supplies to persons who have private health insurance,
– the health insurance body (the private health insurance company) reimburses the costs incurred by its policyholders for medicines, and
– the pharmaceutical company is obliged by law to grant the private health insurance company a discount?

AG Opinion

On the basis of the case-law of the Court of Justice of the European Union (judgment of 24 October 1996 in Elida Gibbs, C‑317/94, EU:C:1996:400, paragraphs 28 and 31) and having regard to the principle of equal treatment under EU law, a pharmaceutical company which supplies medicinal products is entitled to a reduction of the taxable amount under Article 90 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax in the case where

– it supplies those medicinal products to pharmacies via wholesalers,

– the pharmacies supply those products, subject to tax, to persons with private health insurance,

– the insurer of the medical expense insurance (the private health insurance company) reimburses the persons insured by it for the costs of purchasing the medicinal products, and

– the pharmaceutical company is required to pay a ‘discount’ to the private health insurance company pursuant to a statutory provision.

Decision

In the light of the principles defined by the Court in the judgment of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400, paragraphs 28 and 31), regarding the determination of the taxable amount for value added tax and having regard to the principle of equal treatment under EU law, Article 90(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the discount granted, under national law, by a pharmaceutical company to a private health insurance company results, for the purposes of that article, in a reduction of the taxable amount in favour of that pharmaceutical company, where it supplies medicinal products via wholesalers to pharmacies which make supplies to persons covered by private health insurance that reimburses the purchase price of the medicinal products to persons it insures.

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