Tag Archive: Pharma

1. Ireland’s Pharmaceutical Tax Advantages Under Scrutiny

   12 March 2025 7:18 am Leave a Comment

   Ireland’s Pharmaceutical Tax Advantages Under Scrutiny – Introduction

   Ireland has long been a corporate tax haven for multinational companies, particularly in the pharmaceutical and tech industries.

   With its low 12.5% corporate tax rate and business-friendly policies, the country has attracted some of the world’s largest firms, generating billions in tax revenue.

   However, recent political rhetoric from former US President Donald Trump and other US lawmakers suggests that Ireland’s days as a low-tax hub for US multinationals may be numbered.

   With the US reconsidering its corporate tax policies and a global push for a minimum tax rate, experts warn that many US-based pharmaceutical companies could relocate profits back to the US.

   This would have serious implications for Ireland’s economy, given that US multinationals account for over 75% of its corporate tax receipts.

   Why US Pharmaceutical Companies Choose Ireland

   Ireland’s tax advantages have made it a prime location for US pharmaceutical giants such as Pfizer, Johnson & Johnson, and AbbVie. The benefits include:

   • Low corporate tax rate (12.5%) – one of the lowest in the developed world.
   • Favorable intellectual property tax schemes, allowing firms to shift profits from high-tax jurisdictions.
   • Access to the EU single market, making Ireland an attractive base for global operations.

   However, Trump and other US politicians have criticized these tax advantages, calling for policies that would repatriate corporate profits and force US firms to pay more tax at home.

   Potential Impact on Ireland

   If US companies begin repatriating profits or restructuring to reduce their presence in Ireland, the Irish economy could take a major hit. The risks include:

   • Loss of corporate tax revenue, which funds key public services.
   • Potential job losses, as companies reduce investment in Irish operations.
   • Weaker economic growth, given the heavy reliance on multinational firms.

   The OECD’s global minimum tax agreement, which Ireland has signed, is also expected to increase corporate tax rates to at least 15%, reducing Ireland’s ability to offer ultra-low tax incentives.

   Ireland’s Pharmaceutical Tax Advantages Under Scrutiny – Conclusion

   Ireland’s corporate tax model has been a major success story, but global tax reforms and shifting US policies may force a rethink.

   While Ireland remains an attractive business location, it may need to diversify its economic strategy to reduce reliance on US multinationals.

   Final Thoughts

   If you have any queries about this article on Ireland’s pharmaceutical tax advantages, or tax matters in Ireland, then please get in touch.

   Alternatively, if you are a tax adviser in Ireland and would be interested in sharing your knowledge and becoming a tax native, then please get in touch. There is more information on membership here.

2. Hungary’s Pharma industry benefits from wind(fall) break

   25 July 2023 10:29 am Leave a Comment

   Hungary windfall tax relief – Introduction

   In December 2022, Hungary’s government introduced a windfall tax on drug producers.

   It was based on net revenues generated in 2022 and 2023 in attempt to ‘cure’ its ailing state budget.

   The rate increased progressively from 8% on net revenues exceeding 150 billion forints ($398 million).

   Companies have to pay the new tax for both 2022 and 2023 next year.

   Relief from windfall tax

   However, the government has somewhat rowed back to provide support to some of the businesses within its scope.

   Published in the Hungarian Gazette on 17 July 2023, the detailed legislation provides for taxpayers to reduce windfall tax and increased clawback payment obligations.

   These measures come as welcome news for the Pharma industry, offering potential relief based on investments in tangible assets and research and development costs.

   Reducing the increased clawback payment obligation – conditions

   The tax relief provides a potential lifeline for eligible taxpayers in the pharmaceutical sector. It offers the opportunity to reduce their clawback payment obligation in the 2023 and 2024 tax years.

   Deductible items include the cost of investments in Hungary for tangible assets, direct costs of fundamental research, applied research, and experimental development in the healthcare sector.

   Furthermore, marketing authorization holders or distributors, in case of an approved agreement, can apply the tax relief starting from 20 July 2023, and continue to benefit from it for both 2023 and 2024.

   Benefits for consolidated companies

   For corporate groups preparing consolidated financial statements, an affected company may also apply deductible items indicated in its financial statement for the tax year preceding the ongoing tax year.

   This provision ensures that consolidation does not overshadow the tax relief, allowing for smoother application and fair distribution of benefits among the group entities.

   Direct R&D Costs and Clinical Research

   The tax relief extends further, encompassing the costs of phase I to III clinical trials and clinical research commissioned in Hungary as deductible items.

   Moreover, the location of direct R&D costs is no longer a barrier, as long as the clinical research is conducted in Hungary.

   However, some restrictions may apply in specific cases.

   Commencement rules

   The clawback payment obligation rules took effect from 18 July 2023.

   Taxpayers can apply the relief for the first time for the clawback payment obligation due by 20 July 2023.

   Any remaining unused tax relief may be applied to subsequent clawback payment obligations, while the relief is available until the clawback payment obligation due by March 20, 2025.

   Reducing windfall tax on Hungarian pharmaceutical manufacturers – conditions

   The same favorable rules apply to Hungarian pharmaceutical manufacturers regarding deductible items and tax relief caps.

   Clinical research commissioned in Hungary involving the manufacturers may also be considered to reduce windfall tax.

   However, unlike the clawback payment obligation, the windfall tax relief will only take effect on 1 January 2024.

   Hungarian pharmaceutical manufacturers can apply the relief for the first time when determining their tax liability for the tax year 2024.

   Hungary windfall tax relief – Conclusion

   With the introduction of these measures, Hungary’s pharmaceutical industry should he shielded to some extent from the windfall taxes previously introduced.

   These incentives should serve to encourage investments in tangible assets and research and development, while alleviating the financial burden on taxpayers.

    If you have any queries relating to the Hungary windfall tax relief or tax matters in Hungary more generally, then please do not hesitate to get in touch.

   The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.