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Austria Wants Masks To Remain VAT-Free Despite EU Law

By Todd Buell · August 13, 2020, 1:29 PM EDT

Austria wants to continue to exempt medical masks from value-added tax despite being unable to do so under European law beyond the end of July, the country's finance ministry said Thursday.

While European law provides no extension for the zero VAT rate beyond July, Austria wants to leave it at zero, a spokesman for the finance ministry said. This would avoid burdening citizens with an additional cost as they continue wearing masks to help stop the spread of COVID-19, the respiratory ailment caused by the novel coronavirus, spokesman Johannes Pasquali said.

"Our goal still remains to put the VAT for masks at zero," Pasquali said in a statement provided to Law360.

He added, without going into detail, that the government is considering legal steps to undo the return of masks to the standard VAT rate of 20%, which started in August. Austria announced in mid-April that it was putting a 0% VAT rate on medical masks that would last until the end of July.

"In many places, such as supermarkets or public transport, masks are required," Pasquali said. "Therefore, we think it is correct not to further burden the economy and consumers with the value-added tax."

It is up to the European Commission to grant the country permission to extend the zero rating, he said.

The commission didn't respond on the record to a request for comment. 

Austria, along with a number of other countries, has changed its VAT rates during the pandemic. In addition to eliminating VAT on masks, the nation in June reduced the rate for restaurants and cultural activities. The U.K. also temporarily waived VAT on protective equipment in May. It later extended that VAT waiver until the end of October.

In justifying the U.K. waiver, HM Revenue & Customs said the European Commission "recently indicated support for temporary VAT reliefs (including zero-rates) directly linked to the efforts being undertaken to mitigate the impacts of the coronavirus pandemic."

The commission didn't respond to a request for comment.

Germany cut its standard VAT rate by three percentage points and its reduced VAT rate by two percentage points in the second half of the year. 

Austria was one of the first European countries to reopen its economy following shutdowns to stop the spread of COVID-19, allowing some stores to open already in mid-April. Part of the reopening strategy then was requiring masks in public spaces such as stores and public transit.

As of Thursday, the virus has killed 725 people in Austria, with 22,594 total cases of the disease, according to data published by Johns Hopkins University.

--Editing by Neil Cohen.

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