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EU Allows VAT-Free COVID-19 Vaccines, Testing Kits

Posted on Dec. 8, 2020

EU member states may temporarily zero-rate supplies of COVID-19 vaccines and testing kits and other related medical services.

The EU Council on December 7 adopted amendments to the VAT directive (Council Directive 2006/112/EC) allowing member states to extend VAT relief to EU hospitals and medical practitioners to assist in the fight against the coronavirus pandemic, according to a council release.

The European Commission, which had proposed the amendments on October 28, welcomed the move.

“Today's agreement will help ensure that coronavirus vaccines can be acquired VAT-free throughout the EU. I congratulate all involved for the extremely swift adoption of the new rules, which will help make both vaccines and testing kits cheaper,” said EU Tax Commissioner Paolo Gentiloni, in a December 7 commission release. “The successful roll-out of these vaccines is crucial for Europe to emerge from the shadow of the pandemic: It will be the number one priority for the coming months.”

Member states are also permitted to apply reduced VAT rates. Before the new directive, they could apply reduced rates but not zero rates.

The new VAT rules apply from the day after their publication in the Official Journal of the EU, according to the commission release, and run through the end of 2022 or until the council reaches agreement on the commission’s 2018 proposal for new VAT rates.

The commission has made available €100 million through the Emergency Support Instrument to purchase rapid antigen COVID-19 tests and deliver them to member states, according to an October 28 commission communication to EU governing bodies. Over the last several months, the commission has signed six contracts with vaccine producers totaling €1.02 billion in upfront payments.

In April the commission approved requests from member states to temporarily suspend VAT and customs duties on imported medical equipment to fight the spread of the virus. The commission later extended those exemptions until December 31, and then again to April 30, 2021.

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