Dutch tax authority: reduced VAT rate applies to ATMPs
The Dutch tax authority classifies Advanced Therapy Medicinal Products (ATMPs), like cell and gene therapies, as pharmaceutical products. HollandBIO was notified of this decision via a letter from the Dutch tax authority (in Dutch). This means that the reduced VAT rate of 9%, which is applicable to other medicines, also applies to ATMPs. This national decision ends uncertainty about the VAT position of ATMPs and enhances the business climate for ATMP producers in the Netherlands. This decision is the result of joint efforts by HollandBIO, the Association Innovative Medicines, Leiden University Medical Center, the ministries of Health, Economical Affairs and Finance and the Dutch tax authority.
Producing an ATMP: allogeneic or autologous
When producing an ATMP, human cells are often used as a starting point. There are two kinds of sources for these cells: allogeneic or autologous. For allogeneic ATMPs, cells from a donor are used to produce a larger batch of ATMPs. In the production of autologous ATMPs, cells from an individual patient are used to manufacture the ATMP.
Implications of VAT classification of ATMPs
To the Dutch tax authority, it was unclear whether to classify autologous ATMPs as a pharmaceutical product, or a medical procedure. While this question may seem trivial, the consequences of a classification as product or procedure on its tax position are large.
In the Netherlands, a reduced VAT rate of 9% applies to medicines, while medical procedures are exempted from VAT. If ATMPs would be exempted from VAT, the manufacturer would not be allowed to claim a refund of VAT paid on the supply side. For most goods, the high tariff of 21% applies, leading to high extra costs when producing ATMPs.
ATMPs are pharmaceutical products
All other relevant legislation regarding ATMPs treats these as pharmaceutical products. For VAT purposes, this should be no different. Through joint efforts by HollandBIO, the Association Innovative Medicines, Leiden University Medical Center and the ministries of Health, Economical Affairs and Finance we were able to clarify this situation. After constructive meetings, the tax authority has definitively decided that ATMPs are pharmaceutical products, and thus the 9% VAT rate should apply.
Impulse for the business climate
With this national decision the uncertainty around the VAT classification of ATMPs is over. Since ATMPs are now classified as pharmaceutical products, manufacturers can get the VAT paid in production refunded. The combination of financial predictability and a favorable VAT classification makes that this is an important step in improving the business climate in the Netherlands.
With its strong (knowledge) infrastructure, highly educated workforce and robust biotech ecosystem the Netherlands was already a good place for ATMP manufacturers, as illustrated by the presence of Kite and BMS in the Netherlands. This decision further strengthens this position and will hopefully lead to further growth of the Netherlands as a manufacturing location for this new generation of innovative therapies.
You can read the letter from the Dutch tax authority here (in Dutch).
