The Ministry of Industry and Trade has developed a bill that allows domestic manufacturers of medical goods to receive a refund of value added tax by introducing a zero tax rate for a number of products. Amendments are planned to be made to the Tax Code of the Russian Federation (Articles 164 and 165). It is not yet known which medical products will fall under the new rules. It is expected that the list of products will be prepared and approved by December 1, 2023.
Currently, medical goods of Russian and imported origin are subject to VAT of 10%, or they are completely exempt from tax. Manufacturers from Russia do not have the opportunity to return the input tax on the products they purchase and are forced to include it in the cost of the final product, which leads to its rise in price.
At the same time, foreign medical equipment is not subject to VAT, and its manufacturers have the opportunity to return the tax in their country. Thus, unequal competitive conditions are created between local and imported producers. The introduction of a zero rate should eliminate this difference and support local production.
The adoption of the amendments may help reduce the cost of domestic medical products. At the same time, there is a risk of rising prices for imported medical equipment. In response to this, the Ministry of Industry and Trade assured that joint work has been carried out by government agencies (in addition to the Ministry of Industry and Trade: the Ministry of Finance, the Ministry of Health and Roszdravnadzor) to assess the risk of rising prices for foreign medical equipment, for which preferential taxation is planned to be abolished. Based on its results, amendments were recommended for approval.