The European Commission is proposing to give member states the freedom to waive Value Added Tax on defence spending. This is part of a wider range of measures to promote and support coordinated defence spending amongst the member states.
This would be tied to collaboration with in the framework of the Common Security and Defence Policy (CSDP), UN or NATO. Such a measure could especially benefit capabilities developed within cooperative EU frameworks (EDF and/or PESCO and/or within the EDA).
By early 2023, the Commission will make a proposal that would enable a VAT waiver to support the joint procurement and ownership of defence capabilities developed in a collaborative way within the EU, while ensuring compliance with World Trade Organisation rules.
EU grants more VAT rate freedoms for economic crisis
In December 2021, EU finance minister agreed new reduced EU VAT rate setting freedoms which should come into place before April 2022. The European Commission is though open to earlier derogations from the existing VAT Directive restrictions on reduced rates during this temporary energy inflation spike. It has already provided permission to Spain.