ADVERTISEMENTS / When a pharmacy sells a drug for partial payment, the reimbursement from the National Health Fund increases the VAT tax base. Tax liability on this account arises when the pharmacy's bank account is credited
The pharmacy sells drugs for partial payment or free of charge. In connection with this, it receives a refund of the price of the drug from the National Health Fund (NHF). How should the pharmacy account for income tax and VAT, especially when it sells the drug in one month and receives the reimbursement amount in the next month? - asks a reader
Reimbursement is a subsidy for medicines or medical devices issued free of charge or for partial payment. Refunds are not in the nature of subsidies.
Pharmacies receive reimbursement for medicines issued to eligible persons on the basis of the Law of August 27, 2004 on health care services financed from public funds (i.e., Journal of Laws of 2008, No. 164, item 1027, as amended). The mechanism for selling reimbursed drugs is as follows. Medicines are sold to customers at a price reduced by the refund amount. Sales are recorded using a fiscal cash register. Due to the peculiarities of recording sales with a fiscal cash register, the monthly sales report shows the entire amount of sales made, i.e. the part paid by the buyer and the part financed by the National Health Fund. The part financed by the NFZ is transferred to the pharmacy's bank account usually in the month following the month of actual drug sales, and sometimes even two months later. The pharmacy receives payment from the sale of drugs at two points in time: when the drugs are sold by the buyers and when the reimbursement amount is received from the NFZ.
This mechanism for the sale of reimbursed medicines can cause difficulties in determining when revenue arises. Pharmacies often have problems with tax settlements. Complications do not arise when the refund amount is received in the same month in which the drug is sold to the customer. Instead, discrepancies occur when the pharmacy sells the drug to the customer in one month and receives the refund in the following month. Because of the need to accurately separate the amounts reimbursed and the amounts paid by purchasers, some pharmacies are foregoing accurate tax accounting of the amounts of drugs sold. Sometimes they consider the date of sale of the drug to the buyer (without separating the amount of the subsequent refund) as the moment of income. Then the reimbursement income is taxed earlier than the actual reimbursement from the National Health Fund takes place. Also, output VAT is accounted for at the time of sale of the refunded drug on the entire amount (including the refunded amount). In the event of an audit, however, such a procedure can cause the pharmacy considerable trouble.

Income only on the date of reimbursement

From the point of view of income tax, the income of a pharmacy is the actual daily turnover from the sale of drugs. It is also the amount of reimbursement received from the National Health Fund. The timing of income from the sale of drugs in the part paid by the buyer is not in doubt. The date of generation of income in this case is the date of sale of medicines. However, the date on which revenue arises from the receipt of reimbursement is no longer so obvious. It can be the date of sale of drugs recorded on the fiscal cash register or the date of actual receipt of the amount of reimbursement from the National Health Fund.
The date on which the taxpayer received the reimbursement is considered to be the date of receipt of income in the case of drug subsidies for eligible individuals. This was the position taken by the Warsaw-Mokotów Tax Office in an interpretation dated June 2, 2006. (1433/NG/423/134/KO/2006), according to which "the day on which revenue is earned, in the case of drug subsidies, is the day on which reimbursement is obtained."

VAT obligation arises in two stages

Also in terms of VAT, billing rules for the sale of reimbursed drugs are specific. Often pharmacies account for the VAT due at the time of sale of a reimbursed drug, both on the portion paid by the buyer and on the portion reimbursed by the National Health Service. Such conduct is inconsistent with the provisions of the VAT Law.
VAT liability on the sale of drugs and medical devices reimbursed by the National Health Fund arises in two stages:

1. for the first time - when the goods are released in the part paid by the buyer (Article 19(1) of the VAT Act),

2. the second time - when the taxpayer's bank account is credited with the amount of reimbursement received from the National Health Fund (Article 19(21) of the VAT Act). The turnover constituting the tax base is increased by subsidies and other surcharges received. A reimbursement for drugs received by a pharmacy from the National Health Fund is a form of surcharge that increases the VAT tax base. Tax liability for surcharges arises when the taxpayer's bank account is credited.