Assessment of the Validity of Abolishing Value－Added Tax Exemption for Clinical Trial Services
Asian Tax Journal Vol. 17 No. 5 (2016), pp. 67-95
Abstract
Pharmaceutical bio industry is receiving attention as the future－growth industry of our nation. Clinical trial services had been subject to VAT exemption, but services provided under contracts dated after March 17, 2014 are no longer exempt on the basis of the newly established rule of Ministry of Strategy and Finance. Since there has been many disputes regarding the validity of abolishing VAT exemption and has continued to examine the validity and purpose of the present study on this issue. The study was conducted through a literature research and case studies the advanced countries as well as the emerging pharmacy, administrative regulations and case law analysis. Summarizing the results firstly, according to the established rule, a clinical trial is ‘standardized test and measurement procedures for purposes including stability assessment of drugs,’ not ‘diagnosis and treatment services for the patients’. Clinical trials are carried out in the same form (e.g. diagnosis, examination, prescription, dosage, surgical operation) as general medical treatment to patients. Therefore, it can be said that clinical trials are fundamentally a part of medical treatment. Secondly, clinical trials are R&D step required for developing new drugs, it is identical to the purpose of the academic research services of new technologies and theories under the VAT Act. Thirdly, the Ministry of Strategy and Finance did not fully assess the intent of the higher act in the process of assessing whether clinical trials fall into the field of academic research under the VAT Act, and thus committed the error of specifying clinical trials as research for original technology in the Tax Reduction and Exemption Control Act while specifying them as simple services in the VAT Act. Lastly, in the analysis of cases the advanced countries as well as the emerging pharmacy, although the EU is the VAT taxable services for the clinical trials, in the case of India, representing the emerging pharmacy, clinical trial services have been identified and that the tax exemption of Service tax to taxable. And it has been recognized by R & D and clinical trials for drug development in every country on this study. The established rule of the Ministry of Strategy and Finance is judged to have been produced without multi－dimensional evaluation of clinical trial services. VAT on clinical trials should not be levied；it should be evaluated in terms of national support on R&D and industrial policy This research will provide an opportunity to understand the role and the importance of clinical trials and to recognize the iniquity of the established rule.
Keywords
- clinical trial service
- medical treatment
- academic research service
- exemption of valueadded tax
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