A Global Push for Pandemic Tax Relief on Medical Equipment

Dozens of countries are exempting value-added taxes on medical goods and services that help slow the spread of the global coronavirus pandemic.

So far, more than 45 countries have enacted measures that give value-added tax (VAT) relief to companies and individuals donating, supplying, importing, or selling medical services and products like masks, ventilators, and protective clothing, according to data compiled by Bloomberg Tax.

Countries have their own variation in each category. Some like Poland, Finland, and Thailand are only exempting import VAT if the medical supplies are being donated or made free of charge. For more details, read Bloomberg Tax’s country-by-country roadmap covering indirect tax developments.

VAT is a major source of revenue for governments, making up more than a third of government revenue in 2018 for countries that belong to the Organization for Economic Cooperation and Development. The U.S. doesn’t have a national value-added tax system, though similar sales and use taxes are set at the individual state level.

VAT is a tax on consumption designed to be paid by the end consumer. It’s paid at every stage of the supply chain but can be recouped by businesses once sales are made. The recouped tax is known as input VAT.

Taxpayers also have to pay VAT on imported goods, known as import VAT, which is paid immediately when an item enters a country. It’s the most popular type of relief countries are providing on medical goods—with 66% of the 48 countries doing so. Exempting import VAT helps boost the cash companies have on hand during the economic fallout from the pandemic.

Some have temporarily reduced the rate of VAT applicable to certain products: France, Greece, Poland, Portugal, and Tunisia. France cut its VAT rate to 5.5% until Dec. 31, 2021. Greece and Portugal have cut their VAT rates to 6% until the end of the year. Poland reduced VAT to 8% on certain disinfectants until June 30. And Tunisia reduced VAT to 7% until Dec. 31 on the importation, manufacturing, and sale of personal protective equipment.

Meanwhile, Croatia’s Parliament is considering a proposal to reduce its VAT rate to 5% from 25% on protective equipment and other products.