Portugal’s long-running dispute over the VAT treatment of credit notes issued under the agreement between the state and the Portuguese Pharmaceutical Industry Association (APIFARMA) is now effectively won on the merits. The real battleground has shifted: from establishing the principle to securing its financial consequences.
Portuguese tax arbitration tribunals had repeatedly upheld the industry’s position, and the Supreme Administrative Court (STA) had confirmed the underlying reasoning. Sectoral guidance from Ministry of Health bodies had also recognised the credit notes as commercial discounts, to be reflected in the price and issued with VAT.
In practice, that means recovering VAT and interest from the Portuguese Tax Authority (PTA), reviewing adjustments that were never claimed, and assessing whether other contribution or rebate mechanisms offer similar opportunities.
The pharma credit notes dispute
Under the APIFARMA agreements, pharmaceutical companies contributed to the financial sustainability of the National Health Service (SNS), mainly by issuing credit notes to SNS hospitals. Those credit notes reduced the amounts owed for medicines already supplied, and so reduced the consideration the companies ultimately received.
For many years, companies treated the credit notes as post-supply price reductions and adjusted the VAT originally accounted for. In 2020 and 2021, however, the PTA changed its position. It argued that the payments were financial contributions unrelated to the price of the medicines and issued additional assessments and interest, including for 2018 and 2019. The industry challenged those assessments in arbitration and judicial proceedings.
EU VAT case law in the Portuguese courts
The industry’s position drew on the Court of Justice of the European Union’s (CJEU’s) judgments in Boehringer Ingelheim Pharma (C-462/16), Boehringer Ingelheim RCV (C-717/19), and Novo Nordisk (C-248/23): the taxable amount must reflect the consideration the supplier actually receives, regardless of the payment’s legal source, the recipient’s identity, or the payment mechanism.
Portuguese courts applied that reasoning consistently, holding that the APIFARMA contribution is distinct from the extraordinary contribution on the pharmaceutical industry (CEIF), that the credit notes reduced the amount received for medicines supplied to SNS entities, and that the corresponding VAT could therefore be adjusted.
The STA’s ruling of December 3 2025 in case 0376/23.1BESNT reinforced this position. It was not a formal ruling unifying case law, but it significantly reduced the remaining litigation risk. By February 2026, 16 favourable arbitration decisions had been issued, all of which became final as the PTA did not appeal.
Refund execution is now the practical issue
A favourable decision does not automatically produce an immediate cash refund: the PTA has implemented decisions in stages, in some cases refunding the VAT and compensatory interest first and processing indemnity interest separately, and in others leaving both refund and interest outstanding. In some cases, the PTA has also refused to compensate taxpayers for the cost of guarantees that should not have been required, necessitating a separate dispute.
Companies should therefore reconcile each period. The reconciliation should cover:
The amounts assessed and paid;
The effect of the decision or revocation;
The VAT refunded;
Compensatory and indemnity interest; and
Any outstanding guarantee or enforcement costs.
Unclaimed interest and unresolved guarantee costs are not merely administrative loose ends: left unreconciled, they represent real cash sitting with the PTA and a cost of capital the business continues to bear. Errors in the PTA’s calculations may justify further administrative or judicial action.
Reviewing VAT positions
Companies that issued APIFARMA credit notes without adjusting the related VAT should consider a targeted review. Whether VAT can be recovered will depend on three things:
The applicable time limits;
The supporting documentation; and
The ability to link each credit note to the underlying supply, invoice, and SNS entity.
In appropriate cases, recovery may still be possible.
The evidential file is central. It should include the credit notes, invoice references, hospital statements, APIFARMA calculations, records from the Central Administration of the Health System, and the accounting entries.
The next frontier: CEIF and other contribution mechanisms
The outcome also raises a wider question about the CEIF and other statutory or contractual contributions, rebates, and risk-sharing arrangements. The pharma credit notes case law does not mean that every contribution gives rise to a VAT adjustment. It does, however, support a substance-over-form analysis: is the payment directly linked to identified supplies, and does it reduce the consideration the supplier actually receives?
Where a mechanism meets those criteria, there are reasonable grounds to argue that the same reasoning applies. The CEIF’s statutory nature and levy base mean it must be assessed on its own terms, but that assessment may reveal recovery opportunities worth pursuing.
Lessons from the litigation
The pharma credit notes litigation shows the value of combining EU VAT analysis, Portuguese procedural strategy, rigorous evidence, and engagement across the sector. The merits phase was resolved remarkably swiftly for a dispute of this scale, driven by:
An integrated strategy built on EU VAT law, procedural mechanisms, and detailed transaction-level evidence;
Tax arbitration’s ability to produce consistent decisions quickly; and
The clarity of the CJEU case law.
For businesses, the practical lesson is that an early, accurate assessment of the evidential and VAT position can materially shorten the path from dispute to recovery, and help identify related opportunities before they give rise to further litigation.
