The ECJ once again ruled in favour of Boehringer, opening up the possibility for Hungarian pharmaceutical companies to retroactively reduce their VAT liabilities


The Hungarian state unlawfully collected a sizeable amount of VAT from pharmaceutical companies ruled the European Court of Justice (ECJ) in a recent preliminary ruling procedure, initiated by Boehringer Ingelheim against the Hungarian tax authority.

Basing its decision on the principle of fiscal neutrality, the ECJ 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”.

The judgement may affect numerous pharmaceutical companies in Hungary since the background of the case lies in the reimbursement system of medicinal products, one method of which is based on a contractual relationship (so called subsidy volume contract or “támogatás volumen szerződések” in Hungarian) between the pharmaceutical company and the National Health Insurance Fund of Hungary (NEAK). Following the ECJ judgment, it is now clear that pharmaceutical companies are entitled to reduce their VAT with the amount paid to the NEAK under these contracts.

The ECJ also ruled in a separate question that VAT reduction must not be conditional on the availability of an invoice where no such invoice has been issued and where the completion of that transaction can be proved by other means, such as the payment notifications issued by the NEAK.

This was not Boehringer Ingelheim's first case before the ECJ. In 2017, the ECJ ruled in favour of the pharmaceutical company against the German tax authority on similar issues, stating that the discount that the pharmaceutical companies are obliged to grant to a private health insurance company under German law entitles pharmaceutical companies to reduce their VAT taxable amount with discounts given to these health insurance companies. The German tax authority applied a discriminatory approach: if the health insurance company was a public company, the authority accepted the VAT reduction while denying it when the discount was granted to private health insurance companies.

As a result of this decision by the ECJ, the Hungarian tax authority became obliged to reimburse approximately one million Euro to Boehringer Ingelheim.

Further to this recent decision, Hungarian pharmaceutical companies that had entered into similar subsidy volume contracts may potentially seek reimbursement of the VAT amount they have overpaid within the statutory limitation period (i.e. over the past five years) within a six-month window via a special self-revision.

For more details on this ruling and the possibilities this may provide to your company, contact your CMS client partner or local CMS experts: