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Pharmaceutical industry VAT compliance: Time for a VAT health check?

The pharmaceutical industry’s VAT compliance challenges are considerable. This article considers some of the  complexities the pharmaceutical industry faces meeting its global VAT compliance obligations. We also detail why optimising VAT compliance is good business – and why a specialist global VAT service is so invaluable.

Navigating pharmaceutical industry VAT regulations 

Firstly,  there are the complexities of the manufacturing and distribution process: capital-intensive R&D, multinational distribution, and the use of highly specialised equipment.

At the same time, the special regulations relating to medicines and healthcare products need to be carefully considered. 

Given the logistical and regulatory complexities unique to the industry, specialised VAT advice is invaluable. Expert advice helps ensure you are VAT compliant all jurisdictions in which you have an obligation. No less importantly, a VAT specialist will help ensure your business leverages VAT exemptions and reductions effectively. The upshot can be substantial optimisation of cash flow and costs. 

We can get some sense of the intricacy of these VAT issues by taking a high-level look at some of the processes involved in producing pharmaceutical products. 

Research & Manufacturing  

The pharmaceutical industry’s research and development phase is very extensive. 

The importation and distribution of specialised raw materials and equipment for research and testing involve all the usual complexities of the cross-border movement of goods. In addition, there are regulations relating to the specialist materials. 

Clinical trials

Further to the initial R&D stage, clinical trials also involve the movement of products, including medicines and biological materials such as plasma and tissue samples. The VAT implications for importing such materials are highly nuanced and vary from country to country. 

Meanwhile, conducting clinical trials in multiple jurisdictions frequently involves contracting out specialist professionals or hiring local staff.

The highly complex nature of pharmaceutical manufacturing means that specialist equipment is often involved. Components and machinery consequently may involve additional tooling VAT costs. Outsourcing manufacturing to multiple subcontractors in different countries exponentially increases that complexity. 

Understanding the whole to optimise each part

We can thus see that even a high level snapshot of the pharmaceutical production process reveals enormous VAT compliance intricacies.  

First, there’s the movement of goods across borders for varying purposes. Then there’s the provision of professional services in multiple locations and multifaceted supply chains. The process involves a complex chain of research, production, testing and regulatory approval. 

Additionally,  it is becoming more common for pharmaceutical companies providing services directly to clients. That creates a host of new compliance questions beyond those relating to B2B transactions.  

The trusted VAT partner of the pharmaceutical industry

Vatglobal’s specialist team works continuously to master the constantly evolving VAT regulations pertaining to the pharmaceutical industry.

In addition, Vatglobal’s holistic understanding of global and regional VAT regulations enables our consultants to ensure every client is fully compliant and optimally positioned to take advantage of rebates, reductions and exemptions. Plus, our powerful proprietary technology makes VAT compliance much simpler and more efficient.

It’s why Vatglobal is the trusted partner of the pharmaceutical industry. Get in touch to find out what specialist team can do for your business.

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