amending Implementing Regulation (EU) No 282/2011 as regards the update of the VAT and/or excise duty exemption certificate

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

Since 1977, the VAT Directive has provided for an exemption for supplies to the armed forces of any State party to the North Atlantic Treaty that are taking part in a common defence effort outside their own State. This exemption was established to address situations in which the circle of revenue and expenditure flow is broken, because VAT on such supplies would normally constitute revenue for the State in which the armed forces are located, rather than their own. It is among the exemptions to be found in Article 151 of the VAT Directive.

The Excise Directive has provided for a similar exemption from excise duty since 1993 for movements of excise goods to the armed forces of any North Atlantic Treaty Organisation (NATO) member.

In December 2019, the Council adopted amendments to the VAT and Excise Directives, introducing exemptions with regard to defence efforts carried out by the armed forces of a Member State in another Member State for the implementation of a Union activity under the common security and defence policy (CSDP), which was established as the European security and defence policy (ESDP) in 2000. The date of entry into application of the new measures by the Member States is 1 July 2022.

In July 2021, the Council adopted amendments to the VAT Directive, introducing further exemptions with regard to measures taken at Union level in response to the COVID-19 pandemic. Member States are set to apply these new exemptions from 1 January 2021 retroactively.

The measures provided for in the VAT Implementing Regulation implementing the exemptions laid down in Article 151 of the VAT Directive therefore need to be adapted correspondingly.

•Consistency with existing policy provisions in the policy area

The proposal is closely linked with the amendments to the VAT and Excise Directives adopted in December 2019, complementing the 2016 VAT Action Plan setting out ways to modernise the VAT system so as to make it simpler, more fraud-proof and business-friendly. It is also closely linked with the amendments to the VAT Directive adopted in July 2021, introducing exemptions with regard to Union measures in response to the COVID-19 pandemic addressing the effects of the ongoing health crisis.

The objective of the proposal is to provide for measures necessary to implement the new exemptions pursuant to Article 151(1)(ab), (ba) and (bb) of the VAT Directive as well as Article 12(1)(ba) of the Excise Directive.

•Consistency with other Union policies

The proposal is consistent with the global strategy for the European Union’s foreign and security policy (EUGS) and the implementation plan on security and defence, which sets out proposals to implement the EUGS in the area of security and defence.

It implements the Commission’s commitment in the action plan on military mobility to assess the feasibility of aligning the VAT treatment of defence efforts in the EU framework and under the NATO umbrella. The proposal is also consistent with the European defence action plan, which includes the launch of a European Defence Fund, and the Athena mechanism, which (pursuant to Article 41(2) TEU) handles the financing of common costs of EU military missions and operations in the framework of the CSDP. The proposal is also in line with Union initiatives taken in response to the COVID-19 pandemic and it particularly supports urgent measures taken under the Emergency Support Instrument (ESI) in order to address the effects of the ongoing health crisis.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis