Romania has introduced a new clawback tax for companies holding market authorizations for drugs subsidized by the Romanian state budget. The clawback tax is calculated as a percentage of total subsidies paid from the budget for the subsidized drugs sold, and is paid on a quarterly basis. The tax rate and total subsidies for each drug are communicated by the National Health Insurance House. The tax aims to recover subsidies paid in excess of budgeted amounts, but its calculation may breach taxation principles by taxing VAT.

1. New clawback tax imposed on holders of market authorization for
certain drugs
(Government Emergency Ordinance no. 77/2011 regarding the introduction of a tax meant to finance
certain expenses in the public healthcare sector, published in the Official Gazette no. 680/2011).
As of 1 October 2011, Romania has introduced a new clawback tax for companies holding the
market authorisations for drugs subsidised by the Romanian state budget, included in the relevant
lists of subsidised medication under the public healthcare programs. We note that a previous
version of clawback tax used to exist in Romania in the past as well, however the previous version
of tax applied based on considerably different basis.
The main characteristics of the new clawback tax are as follows:
The clawback tax is due on a quarterly basis, by all companies (Romanian and foreign)
holding market authorisations valid in Romania for drugs subsidised under the public
healthcare system. Romanian companies are liable directly for the clawback tax, while
foreign companies with no direct legal presence in Romania need to appoint a
Romanian legal representative to undertake all obligations concerning this tax on their
behalf (i.e. computation, declaration and payment of the tax).
non-Romanian legal entities holding market authorizations valid in Romania for the
above-mentioned subsidised drugs must comply, until 30 October 2011, with the
following express requirements:
provide the National Public Health Insurance House with a written notification containing
the details of the Romanian company appointed as legal representative for the purpose of
the clawback tax; we note that the legal representative appointed needs to be a
Romanian company having accepted to undertake this role, acting under a power of
attorney expressly granted by the foreign company in question;
register with the National Agency for Fiscal Administration (“ANAF”) for the purpose of
the clawback tax, via the designated legal representative.
the clawback tax is computed as a percentage of total subsidies paid from the
Romanian budget, in a given quarter, in relation to the subsidised drugs for which the
taxpayer holds a market authorisation, as follows:
Clawback tax = p% * Total subsidy paid by the state budget in relation to drugs sold
DCTAX S.R.L. Contact:
21 Ermil Pangrati Street, District 1, Bucharest Emilia Dragu Alina Zarzu
Tel: 031 229 2200; 031 229 2201; Fax: 031 229 2202 emilia.dragu@dctax.ro alina.zarzu@dctax.ro

2. Since subsidies are paid from the budget depending on actual end-use consumption (i.e.
retail sales made by pharmacies and hospitals), which cannot be always determinable by the
holder of the market authorisation, the overall subsidies paid in relation to each drug is to
be communicated by the National Public Health Insurance House directly to each
authorisation holder, respectively to designated legal representatives.
The clawback tax rate (i.e. percentage p% in the formula above) is also determined by the
National Public Health Insurance House based on the following formula:
−
%=
Judging by the method of computation of the clawback tax, it appears that the Romanian
Government’s intention was to recover, in the form of this clawback tax, the entire excess in
subsidies paid for listed drugs over the budgeted subsidies. Moreover, the computation
of the clawback tax appears to have failed to take into account the fact that its
taxable base includes also VAT (since subsidies paid for drugs subsidised in the public
healthcare system cover their price inclusive of VAT), therefore meaning that the
clawback tax applies also to VAT, breaching basic principles of taxation. For the time
being though, no official action has been taken to cancel this clawback tax.
the elements needed for computation of the clawback tax owed by taxpayer (i.e. the
percentage p% and the total subsidy for each drug included in the subsidy list) will be
communicated to the taxpayers by the National Public Health Insurance House on a
quarterly basis, by the end of the month following each quarter.
the clawback tax must be computed, declared and paid to the state budget on a quarterly
basis, by the 25th of the second month following the quarter, starting with the total value of
consumption of medicine recorded starting 1 October 2011;
Bucharest, 18 October 2011
DCTAX S.R.L. Contact:
Str. Ermil Pangrati nr. 21, Sector 1, Bucuresti Emilia Dragu Alina Zarzu
Tel: 031 229 2200; 031 229 2201; Fax: 031 229 2202 emilia.dragu@dctax.ro alina.zarzu@dctax.ro