On February 22, 2019, the Ministry of Finance, the General Administration of Customs, the State Administration of Taxation and NMPA jointly issued the Notice on VAT Policies for Orphan Drugs (hereinafter referred to as Notice), marking the official “Landing” of preferential VAT for the first batch of drugs for orphan diseases (orphan drugs) .
On February 11, Premier Li Keqiang presided over the Executive Meeting of the State Council and decided to grant VAT preferential treatment for drugs for orphan diseases. As from March 1st, the valueadded tax for the first batch of 21 orphandiseases drugs and 4 APIs shall, with reference to anticancer drugs, be reduced to 3% upon import, and the domestic link can opt for 3% in simplified method for calculating VAT.
The Notice pointed out that in order to encourage the development of the orphan diseases pharmaceutical industry and reduce the cost of drugs for patients, as from March 1, VAT general taxpayers can opt for calculating and paying VAT as per the simplified method at the 3% rate for manufacturing, wholesale and retail of orphan drugs. The taxpayer mentioned above shall not alter the tax payment method within 36 months after selecting the simplified method for VAT calculation and payment. As from March 1st, the VAT for imported orphan drugs shall be levied at a reduced level at 3%. Taxpayers should separately account for the sales of orphan drugs.
The orphan drugs referred in this Notice denote the preparations and APIs approved by NMPA for orphan diseases. According to the Notice, the first batch of orphan drugs covers 21 kinds of preparations such as Bosentan Tablets, Ambrisentan Tablets, Adempas (Riociguat) Tablets, human coagulation factor VIII, human prothrombin complex; and 4 APIs: bosentan, pirfenidone, penicillamine and riluzole.
The Notice clarified that the scope of orphan drugs shall be subject to dynamic adjustments determined, as appropriate, by the Ministry of Finance, the General Administration of Customs, the State Administration of Taxation, and NMPA. (Source:China Pharmaceutical News February 25, 2019)