Developments on GMP Classification of Fiscal Imports


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In February 2022, the long-awaited Annex 21 to Eudralex Vol. 4 was published. From its concept paper back in 2015 it took seven years to finalize this relatively short annex. In fact, the potential need for an Annex 21 was identified only during the development of Annex 16 (issued in 2016) when the authors of said annex concluded that not all topics around importation could be clarified. A further delay of Annex 16 was avoided. Therefore, one dominant and main driver for the existence of Annex 21 is the existence of fiscal importation and whether such concepts of international money transactions crossing outside boarders of the EU should be handled according to GMP regulations or not. The issue was legally complex. Annex 16 was cleared to be published in 2016, the solution on fiscal importation was expected to come with Annex 21. It did not.

Hold on, we first need to understand the term fiscal importation. A fiscal importation would happen, if a company performs invoicing from outside EU territory to inside EU territory without a parallel physical flow of goods. Recipient of the invoice would usually be an EU affiliate of the same international company conglomerate than the company issuing the invoice. Characteristics of such fiscal import is the decoupling of financial and physical flows of goods. A physical import may or may not happen at a different time involving the same or different parties.

Why would companies do fiscal importations? Although other drivers cannot be excluded, the main driver for such company behavior is translocation of earnings from one country to another country. The original value may be generated within EU or outside EU which is not important for our discussion. The target is to benefit from lower tax rates under such financial constructions. The set-up can be executed in compliance to financial legal rules.

Back to Annex 21. In chapter 2.1 of Annex 21, we find the clear statement that "fiscal transactions are not part of this annex". ECA/ EQPA together with many industry associations have always argued during the development process of Annex 21 that fiscal transactions should not become part of GMP rules. The parties even argued that this would be an overload and unfavourable mix-up of technical regulations with fiscal regulations. Another place than GMP rules in the legal system for such regulations should be found. - An early conclusion of ECA/EQPA and other parties about the sentence cited above therefore was that the comments have been heard. Instead, this is not fully the correct conclusion.

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The truth is more like not part of, not regulated. We today have to conclude, that the statement within Annex 21 does only summarize that no European harmonization has been achieved and national interpretation of the relationship of GMP and fiscal transactions continue to apply. Annex 21 has not met one of its most important goals to close this discussion on fiscal importation and to provide an applicable rule for all member states. In consequence, for many QPs in several member states this may result in the national expectation, that such fiscal transactions require a QP certification. EQPA currently has no overview in which member states this applies. We hear more or less strict statements and enforcements from several member states.

In the environment of GMP it is rare that cases are escalated to courts and even higher courts have to provide us with court decisions. For fiscal transactions money is in the play and the likelihood for court decisions increases. In Germany the appropriate federal court came now to a remarkable decision on a specific case of fiscal importation. The established and followed set-up was found illegal not on the basis of fiscal rules but on the basis of the national drug law which brings us into the hemisphere of GMP.

It is worth to look at this court decision1. The court decision first acknowledges how the supply chain was set up. A manufacturer (MIAH holder) established in France under French law delivers physically finished product to a Wholesale Authorization Holder established in Germany under German law. The invoice for the goods physically received from France is issued by another Wholesale Authorization Holder established in Switzerland under Swiss law. The goods are paid for to Switzerland. All three entities belong to the same larger organization and are affiliates to each other. The company confirms that this financial set-up is maintained for tax reasons.

The set-up constitutes a typical fiscal importation from Switzerland to Germany. The court takes reference to the following legal documents:

I. directive 2001/83/EC art. 40 par. 3, art. 77 par. 1, art. 80 par. 1, art. 85a, 85b par. 1 sub-par. 2
II. German drug law § 4 par. 22 and 32, §§ 52a, 52c, 69 par. 1 sentence 1, § 72 par. 1 sentence 1
III. German GDP ordinance § 1 sentence 1, § 4a par. 1

and comes to the verdict, that medicinal product Wholesale Authorization Holders are only allowed to order (and pay for) products from establishments who hold the appropriate authorization from another EU member state. A Swiss Wholesale Authorization is not equivalent to such required EU Wholesale or Manufacturing Authorization.

The applied logic is the following: Wholesalers fill their stock by taking ownership. Ownership is independent from physical flows and already taken over by paying for the invoice on such stock. The financial transaction determines where the goods are coming from in addition to the physical movement of the goods. In this meaning the financial invoicing from outside EU - in this case Switzerland - becomes import in such a way that a manufacturing and importation authorization is required.

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The QP assumes the responsibility to certify any imported batch of a drug product. This is defined in art. 51 par. 1b of directive 2001/83/ EG for imported batches and found fully applicable on fiscal imports according to the court decision. We know from the development of Annex 16 followed by the development of Annex 21 that both documents do not necessarily define a concept how such QP certification of a financial import would need to look like. Meaningfully, the court decision cites directive 2001/83/EC art. 51 par. 1b that each imported batch needs to undergo the appropriate controls including importation testing. The only escape here to argue that such fiscal import would not automatically cause any new importation testing is the wording of art. 51 par. 1b which does not explicitly require a strict sequence of events such as the full testing upon importation always should happen after importation.

The High Court of Germany decided not to involve the European Court. The company has changed their procedures and stopped fiscal importation subject to the court case (verbal communication).


Up to today no GMP regulation covers fiscal importation. Annex 21 explicitly takes fiscal importation out of scope. EQPA argues since many years, that politically or otherwise not favoured fiscal behaviours should not be healed by means of GMP rules. The QP should not be held responsible for financial transactions and set-ups like fiscal import. The cited court decision extracts from German law but also directly from directive 2001/83/EC that already today fiscal import is one kind of import according to drug laws and requires a MIAH. The QP of the MIAH has to ensure full applicability of art. 51 par. 1b of the directive and needs to take action on certification. This court decision will surely be assessed by the European Commission and other member states. It is applicable in Germany. We are still waiting for an official and harmonized European approach to fiscal import. One favoured solution would be, that cited articles in directive 2001/83/EC will become modified in such a way that the QP is not involved any more.


About the Author:
Dr Ulrich Kissel is Chairman of the European QP Association.

1 ECLI:DE:BVerwG:2021:250221U3C1.20.0

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