Economy
PwC Alert - Legislative commentaries concerning Hungary's Act on the Economical Supply of Medicinal Products
The 20 April 2007 issue of the Tax Authority Gazette (vol. XIX, No. 5) includes a legislative commentary on the provisions of Act XCVIII of 2006 on the safe and economical supply of medicinal products and medical devices and the general rules of medicine distribution (“EMA").
The commentary offers detailed rules on the range of taxpayers subject to, and the due dates for meeting, the new payment and filing obligations prescribed by the EMA. It fails, however, to address a number of practical issues. In the meantime, the Finance Ministry has also prepared another commentary (which has yet to be published) addressing some of those issues in more detail.
The commentary that has been published does not cover registration or other obligations for companies engaged in the distribution or manufacturing of medicinal products where the marketing authorization holder is a foreign-registered company.
On the other hand, the Ministry's other, as yet unpublished commentary clearly states that the new taxes (the 12% tax and the zonal clawback obligation) are always payable by the holder of the marketing authorisation.
Accordingly, if the holder of the marketing authorisation is a foreign-registered company, it must register with the Hungarian Tax Authority.
The Ministry's published commentary does not address the issue of the engagement of a fiscal representative, as an alternative to registration in Hungary, by foreign-registered companies.
The unpublished commentary, on the other hand, states that the Hungarian branch office of a foreign company cannot act as the fiscal representative of another foreign company, i.e. it cannot discharge the Hungarian tax liabilities of another foreign company (e.g. the holder of the marketing authorisation).
A Hungarian company (e.g. a Hungarian subsidiary or associated company of the holder of the marketing authorisation) may, of course, act as the foreign company's fiscal representative provided that the relevant statutory requirements are met.
The published commentary offers no practical guidance on calculating the tax base related to the new tax liability or the new tax itself.
The unpublished commentary, on the other hand, includes references to the method for calculating the tax base for the 12% tax as well as the amount of the zonal clawback obligation.
Tax liability arising with respect to medical sales representatives on maternity leave
According to the EMA, holders of an authorisation for the promotional activities known as ‘detailing' are required to pay a lump sum of HUF 5 million for medical sales representatives employed or otherwise engaged for detailing medicinal products and HUF 1 million for medical sales representatives employed or otherwise engaged for detailing medical devices.
Accordingly, two requirements must be met for this payment obligation to apply: (i ) there must be an employment or other work arrangement between the holder of the authorisation for detailing activities and the medical sales representatives, and (ii ) the activities performed by the medical sales representatives must conform to the terms of the relevant authorisation.
There are, however, cases when, according to the Labour Code, there is an employment or other work arrangement between the taxpayer and the medical sales representative yet the detailing activity cannot be performed.
Such cases include, for example, when the employment or other work arrangement is temporarily suspended while the medical sales representative is on maternity leave, i.e. unable to perform detailing activities.
Under current regulations, an interpretation of the law is possible whereby the taxpayer would not incur a tax liability with respect to employees on maternity leave. Unfortunately, this interpretation has so far not been confirmed by any published or unpublished legislative commentary.
The commentary offers detailed rules on the range of taxpayers subject to, and the due dates for meeting, the new payment and filing obligations prescribed by the EMA. It fails, however, to address a number of practical issues. In the meantime, the Finance Ministry has also prepared another commentary (which has yet to be published) addressing some of those issues in more detail.
The commentary that has been published does not cover registration or other obligations for companies engaged in the distribution or manufacturing of medicinal products where the marketing authorization holder is a foreign-registered company.
On the other hand, the Ministry's other, as yet unpublished commentary clearly states that the new taxes (the 12% tax and the zonal clawback obligation) are always payable by the holder of the marketing authorisation.
Accordingly, if the holder of the marketing authorisation is a foreign-registered company, it must register with the Hungarian Tax Authority.
The Ministry's published commentary does not address the issue of the engagement of a fiscal representative, as an alternative to registration in Hungary, by foreign-registered companies.
The unpublished commentary, on the other hand, states that the Hungarian branch office of a foreign company cannot act as the fiscal representative of another foreign company, i.e. it cannot discharge the Hungarian tax liabilities of another foreign company (e.g. the holder of the marketing authorisation).
A Hungarian company (e.g. a Hungarian subsidiary or associated company of the holder of the marketing authorisation) may, of course, act as the foreign company's fiscal representative provided that the relevant statutory requirements are met.
The published commentary offers no practical guidance on calculating the tax base related to the new tax liability or the new tax itself.
The unpublished commentary, on the other hand, includes references to the method for calculating the tax base for the 12% tax as well as the amount of the zonal clawback obligation.
Tax liability arising with respect to medical sales representatives on maternity leave
According to the EMA, holders of an authorisation for the promotional activities known as ‘detailing' are required to pay a lump sum of HUF 5 million for medical sales representatives employed or otherwise engaged for detailing medicinal products and HUF 1 million for medical sales representatives employed or otherwise engaged for detailing medical devices.
Accordingly, two requirements must be met for this payment obligation to apply: (i ) there must be an employment or other work arrangement between the holder of the authorisation for detailing activities and the medical sales representatives, and (ii ) the activities performed by the medical sales representatives must conform to the terms of the relevant authorisation.
There are, however, cases when, according to the Labour Code, there is an employment or other work arrangement between the taxpayer and the medical sales representative yet the detailing activity cannot be performed.
Such cases include, for example, when the employment or other work arrangement is temporarily suspended while the medical sales representative is on maternity leave, i.e. unable to perform detailing activities.
Under current regulations, an interpretation of the law is possible whereby the taxpayer would not incur a tax liability with respect to employees on maternity leave. Unfortunately, this interpretation has so far not been confirmed by any published or unpublished legislative commentary.
