Czech Republic: Tax base reduction for bonuses paid by pharmaceutical companies to insurance companies
Reduction of the tax base can be performed by a pharmaceutical company that pays a bonus to a health insurance company
Tax base reduction for bonuses paid by pharmaceutical companies to insurance companies
The General Financial Directorate (GFD) confirmed that the reduction of the tax base can be performed by a pharmaceutical company that pays a bonus to a health insurance company regardless of whether the pharmaceutical company holds a decision on the registration of medicinal products and on their placement on the Czech market.
Pharmaceutical companies (drug manufacturers) supply medicines to distributors who dispense them to patients either directly or through other healthcare providers. If the patient is insured with a health insurance company, it is the insurance company that pays for the medicine. The latter has a contract to limit the risks/costs associated with the reimbursement of the medicines with the drug manufacturer (pharmaceutical company), which holds a decision on the registration of medicinal products in the Czech Republic in compliance with the Medicines Act. Under this contract, the drug manufacturer pays a bonus in arrears to the health insurance company once the agreed limit of the insurance company’s annual cost for the medicine is reached.
The holder of the decision on the registration of medicinal products may place medicines on the Czech market directly or through a pharmaceutical importer (i.e., the registration holder and the importer are two different persons). When a health insurance company enters into a contract to limit the risks/costs associated with the reimbursement of medicinal products directly with the importer, it is the importer’s tax base that will be reduced upon the payment of the bonus to the health insurance company, as the importer is economically burdened by the payment of the bonus.
However, if a health insurance company has concluded a contract to limit the risks/costs associated with the reimbursement of medicinal products with the registration holder, but the bonus is in fact paid by the importer, doubts have arisen in practice as to who should reduce the tax base on account of the paid bonus paid.
The GFD confirmed that if the importer paying the bonus is in a contractual relationship with the registration holder, the importer may correct the tax base when the bonus is paid to the health insurance company.
Read a January 2022 report prepared by the KPMG member firm in the Czech Republic
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