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New measures: VAT rate reduction on certain products needed for the fight against Covid-19

Contribution by Nathalie Habibou, Partner – Arsene Taxand

In the frame of the Covid-19 in France, the French tax authorities have taken additional measures for decreasing the VAT rates on certain products needed for the fight against Covid-19, implemented by the amending Finance Bill for 2020. The decrees of the Ministers responsible for Health and the Budget have not yet been published but it will, in principle, provide more details in the coming days.

1. Products concerned by the decrease of the VAT rate

 Articles 5 and 6 of the 2nd amended Finance Bill for 2020, published on April 26th, 2020, provide for a decrease of the VAT rate to 5.5% for the following products – a particular attention should be done on the retroactivity of this measure:

  • Masks and protective clothing suitable for combating the covid-19 for the period from March 24th, 2020 to December 31st, 2021 (new article 278-0 bis K bis of the FTC) => a priori, this will concern : respiratory protection masks (FFP) type FFP2, FFP3, N95, N99, N100, R95, R99, R100, masks for medical use according to standard EN 14683; masks dedicated for non-sanitary uses; the masks that will be developed for the use of the general public (compulsory wearing) – to be confirmed by decree in the coming days
  •  Products intended for personal hygiene and adapted to the fight against the spread of the covid-19 for the period from March 1st, 2020 to December 31st, 2021 (new article 278-0 bis K ter of the FTC) => a priori, this will concern : hydro-alcoholic gels ; hairnets / charlotte, blouses – to be confirmed by decree in the coming days

 Even if the text is not clear cut, the decrease of the VAT rate will concern the sales of goods located in France (according to VAT territoriality rules) or Intra-EU acquisitions of goods (for which French VAT is reverse charged).

Even if it is not expressly mentioned, the importations of those products should be concerned by the measure of the decrease of the VAT rate. However, we understand that the retroactivity should not be applied and the 5,5% VAT rate applies as from the publication of the law (i.e., as from April 26th,2. 

2. Modification of the regulated prices for hydro-alcoholic gels and masks for single use

 The regulated prices have been modified for hydro-alcoholic gels by a new decree published on April 26th, 2020 (Decree n° 2020-477) and are applicable immediately.

Concerning the masks for single use, a new decree published on May 2nd, 2020 (Decree n° 2020-506) states the new regulated prices (e.g., 95 cts, including taxes per mask).

3. Impacts of the retroactivity on the sales already performed

 Due to the retroactive effect of the measure, some impacts must be anticipated for the period from March 1st, or March 24th, to the date of the publication of the Law in April 26th, 2020, (1) depending the products concerned and (2) the contractual relations with the customers (B2B or B2C).

Nathalie Habibou, Partner – Arsene Taxand

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