In order to facilitate common defence efforts and to align with the EU’s Common Security & Defence Policy (CSDP), the European Commission has accepted a proposal to exempt certain supplies to the armed forces from Value Added Tax (VAT) and other excise duties.
Under the agreed new measures, supplies to armed forces will be exempt from VAT when these forces are deployed outside their own Member State and are taking part in a European defence effort of some kind. This aligns with NATO’s defence efforts, where supplies towards their efforts are already exempt from such tax systems.
Under the new rules, armed forces deployed outside their own Member State would not pay VAT or excise duty to other Member States when they take part in a NATO defence effort or in a defence activity under the CSDP. By aligning the indirect tax treatment of both defence efforts, the initiative acknowledges the growing importance of the CSDP which require supplies such as training materials, accommodation, provision of food and fuel – all in principle currently subject to VAT.