Germany: Reduction in VAT base for pharmaceutical manufacturer discounts; other VAT developments
Recent VAT developments that may affect businesses in Germany
The Federal Fiscal Court (BFH) on January 14, 2026, held (decision V B 71/24) that a pharmaceutical company, part of a value added tax (VAT) group, that supplied medicinal products to pharmacies and was legally required to reimburse them for manufacturer discounts, could not reduce the VAT base by the entire amount of such manufacturer discounts.
The court determined that the taxable amount is the actual consideration received, and if the supplier cannot recover VAT from the purchaser, the agreed price is deemed to include VAT. Thus, the company was required to treat the discounts as a reduction in consideration, from which VAT must be deducted, thus only partially reducing the tax.
Read a February 2026 report prepared by the KPMG member firm in Germany
Other recent VAT developments that may affect businesses in Germany include:
- New customs duties on low-value parcels from July 1, 2026 (Council Regulation (EU) 2026/382 of February 11, 2026)
- Time of exercising the right to deduct input tax (GCEU judgment of February 11, 2026, T-689/24)
- Remuneration for public communication without a license (GCEU judgment of February 11, 2026, T-643/24)
- VAT exemption for services provided by autonomous groups of persons (CJEU judgment of January 22, 2026, C-379/24 and C-380/24)
- Applicability of Section 25 UStG to tour operators from third countries (Lower Saxony Fiscal Court (FG) judgment of November 13, 2025, 5 K 42/25)
- Input tax deduction for "mixed pallets" (Münster FG judgment of December 11, 2025, 5 K 1900/23 U)
- Input tax adjustment for trade credits that are ultimately not redeemed (Düsseldorf FG judgment of February 19, 2025, 5 K 588/19 U)
- Container rental for storage purposes (Düsseldorf FG judgment of October 6, 2025, 1 K 1801/21 U)
- Referral to CJEU on input tax refund procedure (Cologne FG judgment of May 14, 2025, 2 K 227/23)
- Permanently loss-making institutions (Federal Ministry of Finance (BMF) letter dated January 20, 2026, III C 2 - S 7106/00069/003/117)