EU to suspend tariffs, VAT on medical equipment to fight Covid-19

The European Commission is planning to temporarily suspend tariffs and value-added tax on imported protective medical equipment in response to the worsening Covid-19 crisis, MLex has learned.

The EU-wide relief will apply retroactively and cover a range of essential medical products such as protective masks and personal garments.

The move comes after several EU governments asked the commission to authorize the suspension of both levies at the national level.

“The Commission stands ready to examine within the briefest delay the requests aimed at making the importation of items for disaster victims free of customs duties and VAT,” according to a letter sent last week from the commission’s tax department to EU and UK customs authorities, seen by MLex.

EU customs authorizes have already been informed by the commission that they can use the flexibilities in the EU’s customs code to suspend collecting tariffs and VAT on critical imported goods on a case-by-case basis, the letter says.

The commission now plans to issue guidelines to EU governments on extending the timeframe for these looser customs procedures.

“The note will also include some suggestions to facilitate the import of medical equipment,” the letter says.

Tariffs

EU import duties on medical devices used to combat the coronavirus pandemic range from zero percent on ventilators to 12 percent on certain personal protective garments. This is significantly lower than the bloc’s average VAT rate of 21 percent.

The bloc imposes, for example, a tariff of 2.9 percent on protective glasses and of 6.5 percent on gloves imported from countries with which it has no trade deal.

In addition, EU production of such equipment is concentrated in four countries ― the Czech Republic, France, Germany and Poland ― which leaves other countries vulnerable to shortages.

The relief plans come after the EU attracted strong criticism from trade experts for introducing an “export authorization mechanism” for protective medical equipment to prevent its outflow from the bloc.

Trade experts have described the measure as harmful, recommending that the EU and governments outside of the bloc should instead temporarily lift import tariffs on medical equipment — an approach recently taken by Brazil — to boost production and trade flows.

Brazil said it would cut to zero the import tariffs on medical products used in the fight against the virus, as well as temporarily exempt local medical production from a federal tax on these products.

The EU’s planned VAT suspension is aimed at making the relief mechanism more effective, MLex understands.