The European Commission has adopted on Wednesday, April 24, a proposal to exempt supplies to armed forces from Value Added Tax (VAT) and excise duties when these forces are deployed outside their own Member State and take part in a European defence effort.

Supplies to armed forces participating in a NATO defence effort can already benefit from such exemptions. Wednesday’s proposal should therefore ensure equal treatment of defence efforts under the NATO and the EU framework when it comes to VAT and excise duties.

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 Common Security and Defence Policy (CSDP).

By aligning the indirect tax treatment of both defence efforts, the initiative acknowledges the growing importance of the CSDP and military mobility which require supplies such as training materials, accommodation, provision of food and fuel – all in principle currently subject to VAT.