Clinical Trial Medicine Import VAT Reduced to Zero % in Israel

A recent amendment to the Israeli Customs Tariff and Purchase Tax on Goods law (Amendment no. 5), 5775-2015, reduces the VAT for medicines imported for clinical trials to zero. On December 7, 2014, the Israeli Ministry of Finance announced that after review of pertinent facts, it has decided that imports of medications authorized by MOH to be used in clinical studies in human subjects will no longer be subject to the existing 18% VAT.

Prior to the amendment, companies importing medicines for clinical trials were required to pay 18% VAT on the CIF value of their shipments (total cost of goods, insurance and freight). Additionally, due to existing stringent tax laws, claims for VAT refunds were not permissible. With the VAT rate now reduced to zero, and combined with an import duty rate of zero for most medicines, companies seeking to expand their trials into Israel will find a greater incentive to do so.

In order to implement the VAT reduction, Israel’s Ministry of Finance has authorized an update to the Value Added Tax Regulation # 5736-1976, this now indicates that medications classified in 30.04 of the Israeli Customs Tariff code, will exempt from the payment of VAT at the time of import.

Companies importing medicines into Israel and seeking exemption to VAT, must demonstrate that their medicines are imported for use in approved clinical trials. Supplying details of the approved protocol reference and import permit at the time of importation is typically sufficient. It is important to note that medicines not imported for clinical trials are still subject to VAT of 18%.

For additional information or questions regarding this update please contact: tradecompliance@marken.com.