Türkiye vs Pharmaceutical Industry and Trade Corporation, December 2011, Danıştay Üçüncü Dairesi, E. 2009/2352, K. 2011/7637, UYAP, 20.12.2011.

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A Turkeys Pharma Company carried out drug production, import and sales operations, and had purchased different active ingredients from foreign group companies.

Following an audit the tax office found that the prices paid by the Pharma Company for six ingredients had been above the market price resulting in a hidden distribution of profits.

A price study was performed for similar active ingredients suggesting price deviations ranging from 167 – 975 %

Table 2: Price deviation from market price

Theophylline 167.26%
ibuprofen 478.34%
Fluoxetine 975.15%
Hyoscine-N-Butilbrüm 150.13%
Povidone Iodine 176.83%
metamizolesodi 260.05%

An assessment was issued where the cost of the ingredients – and thus taxable income of the Pharma company – was adjusted based on the price paid for similar active ingredients between unrelated parties.

The Pharma Company disagreed with the assessment and brought the case before the tax court.

The Tax Court issued a decision in favor of the Pharma company.

In a study from the Turkish Pharmaceutical Association it was stated that active ingredients could have different prices due to reasons such as using original methods, impurities, crystal structure and polymorphism, mesh size, batch size, certificate differences etc.

Based on this study the Tax Court found, that although it had been determined that the Pharma Company had purchased active ingredients at higher prices compared to other companies, there was no clear information about the characteristics of the active substance, production factors, or other factors that will cause price differentiation.

This decision was appealed by the tax authorities.

The Court of Appeal approved of the decision issued by the tax court and dismissed the appeal.

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Turkey 2009-2352-k-2011-7637-t-20-12-2011

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