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European Commission proposes a special VAT exemption

On 12 April 2021 the Commission proposed to exempt from value added tax (VAT) goods and services made available by EU bodies and agencies to Member States and citizens during times of crisis.

The decision is supported by experience gained during the coronavirus pandemic. The pandemic has shown that crises of this type are multifaceted and have diverse effects on our societies. Fast and effective action is vital, so our future reactions need to be well-founded. Besides this, it turned out that the VAT payable with each transaction is not a negligible cost factor in the procurement operations of the already suffering budgets. The proposal aims to maximize the effectiveness of EU funds for crisis management, such as natural disasters and public health emergencies to protect the public interest. In addition, the proposal strengthens EU level disaster and crisis management bodies, such as those falling under the EU’s Health Union and the EU Civil Protection Mechanism.

Once in place, the new measures will allow the Commission and other EU agencies and bodies to import and purchase goods and services VAT-free when those purchases are being distributed during emergency response in the EU. Beneficiaries may be Member States or third parties, such as national authorities or institutions (hospitals, national health or emergency authorities, private emergency response companies). Goods and services covered under the proposed exemption include diagnostic tests and testing materials, personal protective equipment like gloves, respirators, masks, gowns, disinfection products, tents, camp beds, clothing and food, search and rescue equipment, antimicrobials and antibiotics, quarantine facilities and clinical trials.

The legislative proposal will now be submitted to the European Parliament for its opinion, and to the Council for adoption. Once the proposal is passed, Member States shall adopt and publish the laws, regulations and administrative provisions necessary to comply with this Directive.