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China Cuts VAT Liability of Rare Disease Drugs

A new strategy designed to boost the development of medical treatments for less common ailments, while reducing costs for patients, has been jointly unveiled by the Ministry of Finance and three other government departments.

Under the terms of this initiative, as of 1 March this year, any mainland-based standard tax-paying pharmaceutical manufacturer may opt to calculate and pay the VAT due on any drugs they produce / sell (whether wholesale or retail) geared to the treatment of rare diseases at the reduced rate of 3% via the approved simplified method. Once a business has opted to adopt the simplified method, however, it must adhere to this practice for a period of not less than 36 months. Should they wish to take advantage of the simplified method, such businesses will also be obliged to maintain separate records detailing the sale of all drugs designed to treat rare diseases.

In an additional move, the circular also stipulates that, as of 1 March this year, the VAT payable on all drugs imported for the treatment of rare diseases has been reduced to 3%.

For further details (in Chinese), please access the following links:

Circular on the Value-Added Tax Policies for Rare Disease Drugs (Cai Shui No. 24 [2019])

List of Rare Disease Drugs (First Batch)

Content provided by Picture: HKTDC Research
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