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EU Members Can Exempt Coronavirus Vaccines From VAT

By Matt Thompson · October 28, 2020, 1:42 PM EDT

European Union countries can charge a zero or reduced rate of value-added tax on face masks and other personal protective equipment as well as coronavirus vaccines under new pandemic relief measures adopted Wednesday by the European Commission.

The EU had suspended the collection of import VAT on items such as personal protective equipment, testing kits, ventilators and key medicines beginning in May. The exemption was set to expire Nov. 1 but will now run until April.

"There is also room to further adapt the VAT framework to ensure that COVID-19 vaccines and tests become more affordable for health services and citizens," the commission said in a statement.

The commission, the EU's executive arm, is proposing to temporarily adapt the rules to apply a reduced rate or exemptions of VAT for COVID-19 testing kits and allow member countries to grant a zero rate for COVID-19 vaccines, according to the statement.

Under EU VAT rules, a country isn't generally allowed to reduce the rate to zero for an item that has previously been subject to the tax.

However, as a disaster relief measure, an exemption was made for the bloc's 27 member countries and the U.K. to ensure that medical equipment and protective gear could easily get to where it was needed.

"The COVID-19 situation is very serious," European Commission President Ursula von der Leyen said in announcing the measures. "We must step up our EU response."

The U.K., despite having left the bloc, is still subject to its VAT rules under a transition period due to expire Dec. 31. The British government has drawn criticism in recent days for ending its zero rating for personal protective equipment on Nov. 1, when the original EU level exemption was set  to expire.

HM Treasury didn't immediately respond to a question about whether the British government intended to take advantage of the rule change to continue to charge less VAT on face masks, which are currently mandatory in a range of settings.

--Editing by Neil Cohen.

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