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Infographic: 3D printing and pharmaceuticals

The new technology will transform manufacturing and the supply chain, creating significant tax implications for companies.

What if tangible goods moved digitally across borders? If centralized production migrated to local markets? If products could be customized in real time?

What if distributors or even individual consumers produced a corporation’s goods?

For many companies, this is what the future will look like thanks to 3D printing, also known as print on demand.

3D printing is set to transform manufacturing and supply chains as we know them, creating significant tax implications for companies.

Traditional drug production


3D drug production

Download infographic as a printable pdf document.

High-tech pills

Efficiency gains

3D printing will allow companies to make medicines safer and more effective by customizing the size, shape, dosing and rate of release. Drug development is likely to speed up, and pharma companies will be able to more profitably develop drugs for rare diseases, an attractive market for drugmakers.

The trailblaze

An epilepsy drug by Aprecia is the first 3D-printed medicine approved by the U.S. Food and Drug Administration. The drug uses so-called 3DP (power-liquid three-dimensional printing), a process first developed at the Massachusetts Institute of Technology (MIT) in the 1980s and used in the automotive and other industries. The technology allows the drug to be made as a porous matrix that dissolves, making it easier to swallow.

A pill a day

Taking one’s daily medicine, especially for older people or those with a serious illness, can be a real challenge. Different pills, different days, different times. But 3D printing may soon come to the rescue. A chemical engineer at the National University of Singapore (NUS) used software to create an edible shell that can hold different drugs, and control their release at different times.

Managing tax in a 3D world

Below are some of the areas where major tax issues could arise as a result of 3D printing.

IP threshold

Intellectual property (IP) will be the threshold issue, leading to an array of questions with no obvious answers. If a drugmaker provides a digital drug design, is the IP provided as a service or is it licensing software? Can raw materials be sold without charging for the blueprint? Where is the IP housed? Where is it being exploited? Who owns it? Taxation hinges on these and many related questions.

Reconsidering nexus

Company tax profiles will also need reconsideration. Multinationals will have difficulty determining the most relevant factors for determining nexus, since 3D manufacturing seemingly does the opposite of what policy stakeholders have outlined as guidance: align profits to people and their functions. With 3D printing, where is the base of a product’s profit located and who gets the right to tax it? Tax authorities in different countries could come up with different answers, increasing the risk of double taxation.

Transfer pricing transformed

Transfer pricing will require new calculations. Consider, for instance, a multinational corporation using a related company as a distributor in a given country. Once that distributor begins printing drugs, it could be considered a factory. The related transfer pricing would change, but it is unclear how or by how much under current tax laws.

VAT uncertainty

Distributed 3D printing triggers new issues with value-added tax (VAT) since it transforms the value chain. Any transition to 3D printing without deliberate tax planning could result in a structure or go-to-market strategy that ends up with irrecoverable indirect tax in the supply chain that will eat into margins. Customs duties will also be affected as manufacturing becomes more globally distributed via 3D printing.

This article is included in Tax Insights issue 17 – Transformation and innovation (pdf)

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