Member States' ambassadors to the EU (Coreper) on Wednesday 30 October endorsed the proposal for a directive to exempt supplies to armed forces participating in a European defence effort from value added tax (VAT) and excise duty (see EUROPE 12241/16). The EU Council is expected to formally adopt, without discussion, its position ('general approach') at the Ecofin Council on 8 November.
It proposes to amend the two VAT and Excise directives to rule that armed forces deployed outside of their own Member State would not pay VAT or excise duties to other Member States when they participate in a defence activity under the Common Security and Defence Policy (CSDP). Its objective is to harmonise the VAT regime applicable to defence efforts within the EU and NATO.
At the beginning of October, the compromise text was already settled at the technical level, but Romania blocked the conclusion of an agreement between the Member States (see EUROPE 12347/14) in order to have additional political leverage to negotiate the exemption it wanted on its home-made alcohols in another case (see other news). After several bilateral contacts, the country finally released the block.
There are no substantive changes compared to the Commission's initial proposal. The EU Council has made only a few clarifications. It specifies in addition that exemptions should not cover civilian missions under the CSDP.
So goods delivered or services provided which are intended for the use of civilian personnel could therefore only be covered by these exemptions when civilian personnel accompany armed forces performing tasks directly related to a defence effort under the CSDP outside their Member State, the text stresses.
It also specifies that tasks performed exclusively by civilian personnel or by civilian functions should not be considered as a defence effort. Nor should the exemptions apply to goods or services acquired by the armed forces for use by accompanying civilian personnel in their own Member State.
It should be noted that the EU Council text maintains the transposition deadline set by the Commission as 30 June 2022.
On the European Parliament's side - only consulted on the matter - the rapporteur, Paul Tang (S&D, Netherlands), suggested amending the definition of "defence effort within the Union" in the text, in particular to ensure that all military actions, formations or structures carried out under Article 42 TEU, which defines the scope of the CSDP, are covered. His report is due to be discussed in the Parliament's Committee on Economic and Monetary Affairs (ECON) on Monday 4 November.
See the EU Council text: https://bit.ly/2JADStC (Original version in French by Marion Fontana)