Good taxation practice (VAT rate 10%)

Unjustified taxation practice is one of the most serious problems reducing Russia’s attractiveness as a clinical research market

In most countries lots of medicines for clinical trials are not taxed because of non-commercial use by clinical trials subjects and being free for them. In Russia VAT rate for commercial lots of imported medicines is 10%, and for non-commercial lots for clinical trials – 18%

January 1, 2008 Federal law 85-FZ of May 17, 2007 «On introducing amendments to chapters 21, 26.1, 26.2 è 26.3 of Part Second of the Tax Code of the Russian Federation» came into effect.

According to the amendments introduced by this law to the second paragraph of the fourth subparagraph of the article 164 of the Tax Code, VAT rate 10% shall be applied to all imported medicines including medicines for clinical trials.

But taxation practice did not change instantly. At first customs refused to apply VAT 10% rate for medicines for clinical trials referring to the absence of the prescription of the Federal Customs Service. The representatives of the Federal Customs Service refused to admit the right of taxpayers to apply VAT 10% rate referring to the fourth paragraph of the article 164 of the Tax Code. According to it the code list of goods named in the article 164 is to be approved by the Government of the Russian Federation. ACTO appealed to the Ministry of Finance and the Government of Russian Federation.

The answer of the Ministry of Finance

The answer of the Federal Customs Service

As a result customs began to apply rate VAT 10% for imported medicines for clinical trials but continued refusing to apply VAT rate 10% if there was placebo in the lot. ACTO appealed to the Government of the Russian Federation.

January 15, 2008 - the resolution of the Government ¹ 688 «On approval of the code list of medicinal goods for which VAT rate 10% shall be applied».

That way the code list of goods that are taxed at the rate of 10% was approved including medicines and placebo imported for clinical trials and for those import there is a permission issued by the relevant authorized federal executive body.

The resolution came into effect October 1, 2008.

So the discussion about the application of VAT rate 10% to medicines for clinical trials and placebo was positively resolved for market players.