The European Commission waives customs duties and VAT on the import of medical equipment from non-EU countries as a COVD-19 measure. See link. This may men for instance that medical goods can be bought by health institutions without VAT. These health institutions typically have no right to deduct VAT, so VAT is a cost for them.
Some Member States already implemented 0% or reduced VAT rates for the supply of the same goods, so also applicable to I/C acquisition of domestic supply of the same goods (see e.g. Spain, Ireland and Poland.
0% VAT rate on imports, standard and reduced VAT rate for I/C or domestic purchases …
However, when the same goods would be bought from suppliers in the EU, including suppliers in the same country of the health institution, the VAT rate applied on these products will be the standard VAT rate or in best case, a reduced VAT rate. This would mean that goods imported in the EU, and assuming the same cost price, will be cheaper for the health institution due to the VAT rates to be applied (0% (exempted) for imports vs. reduced/standard VAT rate for I/C and domestic supplies). The current VAT directive does not allow for a 0% VAT rate on these goods.
Draft Council Directive on Modernizing VAT rates
Based on the ”Guidance Note on the VAT treatment of supplies of goods needed to combat the COVID-19 outbreak (see link) ” issued by the European Commission, Member States could apply 0% or reduced VAT rates based on the Draft Council VAT Directive (see link), even n case the current wording of the Directive 2006/112/EU would not allow this.
- Annex III of the VAT Directive which lists goods eligible for a reduced VAT rate does not cover all goods intended for general use, which may be used to protect individuals from or prevent the spread of COVID-19 (e.g. personal protective equipment, medical devices etc.).
- The 2018 Commission proposal to amend the VAT Directive as regards VAT rates, if adopted by the Council based on its original approach i.e. with a negative list, would allow all Member States to apply a reduced or even zero rate to the supply of such goods (provided that such supply only benefits the final consumer and pursues an objective of general interest).
- As regards intra-Community acquisitions and domestic supplies of such goods, current VAT rules do not permit the application of reduced or zero rates to this type of products. However, the Commission proposal currently on the table of Council would make it possible, if adopted. The Commission has, in its 2016 Communication on enforcement of EU Law, indicated that it will not normally launch infringement procedures when a legislative proposal which would make the conduct in question lawful is pending before the Council.
