The Council is allowing tax exemptions in cases of free allocations.

UM – 07/2021

On July 13, the Council agreed that further products and services imported by EU institutions in response to the coronavirus pandemic would no longer be subject to VAT. In principle, only goods and services that are strictly intended for official use by the purchasing body will be exempt from VAT. Those purchases that were procured as a result of the coronavirus crisis will now be "reduced” as well. This exemption will also apply when they are passed on free-of-charge to other member states.

Maximising benefits

EU Directive 2021/1159 issued on July 13, 2021 amends the VAT Directive (2006/112/EU) accordingly. The EU will then use its financial instruments to support the EC and EU agencies and bodies in tackling emergencies. The EC has stated that measures related to the coronavirus crisis should not be hampered by the loss of valuable resources. The EU budget must be used in the best possible way to overcome the serious consequences of the pandemic. Nor should the task be made more difficult because the responsible authorities are unable to collect VAT.

Retroactive tax exemption

The exemption will apply retroactively from January 1, 2021 in order to cover measures already in progress, such as those launched under the Emergency Support Instrument (ESI). Necessary corrections should be made in the VAT declarations. The new exemptions will apply up to the point in time when the crisis situation caused by the COVID-19 pandemic is resolved. They will come into force on their publication in the EU’s Official Gazette on July 15, 2021.

Previous tax relief

Pandemic-related amendments to the VAT Directive were also made last year. EU Directive 2020/2020 of December 7, 2020 also introduced temporary measures for COVID-19 vaccines and in vitro diagnostics such as tests or laboratory reagents and it allowed tax exemptions or reduced tax rates to be applied. Back in April, member states were allowed to temporarily exempt products for combating the effects of the COVID-19 outbreak, which included in vitro diagnostic medical devices, from VAT and import duties. However, this EU Decision 2020/491 only covered imported supplies and not inter-community supplies or domestic supplies. It was also due to expire on July 31, 2020.