Tax exemption for COVID-19 in-vitro diagnostic medical devices and COVID-19 vaccines   

The European Commission has introduced measures that enable Member States to relieve of or reduce VAT for EU hospitals, medical practitioners and individuals when purchasing COVID-19 vaccines and testing kits. Council Directive (EU) 2020/2020 of 7 December 2020 amending Directive 2006/112/EC (the Directive) allows Member States to apply a reduced VAT rate to the supply of COVID-19 in vitro diagnostic medical devices and services.


The new rules were adopted unanimously and swiftly by all Member States of the European Union and are based on a Commission proposal of 28 October 2020. They are conceived to provide better and cheaper access to the tools needed to treat, detect and prevent the coronavirus.

The EU Commissioner for Economy called the new agreement "the number one priority for the coming months". The new rules will help ensure that the coronavirus vaccines and tools can be acquired VAT-free throughout the European Union.

Before this rule applied, Member States could only reduce VAT rates on sales of vaccines but could not determine a zero VAT rate. At the same time, testing kits could not benefit from reduced rates at all.

What measures can be taken?

Member States may take one of the following measures:   

► apply a reduced rate to the supply of COVID-19 in vitro diagnostic medical devices and services closely linked to those devices; or    

► grant an exemption with deductibility of VAT paid at the preceding stage in respect of the supply of COVID-19 in vitro diagnostic medical devices and services closely linked to those devices.

For whom does the Council Directive apply?

The measures allow Members of the European Union to suspend a VAT exemption for a limited period of time for vaccines and testing kits being sold to hospitals, doctors and individuals, as well as closely related services. Under the amended Directive, Member States will be able to apply either reduced or zero rates of VAT to both testing kits and vaccines.

What shall be eligible for VAT exemptions?

Member States may grant an exemption with deductibility of VAT paid at the preceding stage in respect of the supply of COVID-19 vaccines and services closely linked to those vaccines.

COVID-19 test kits must conform with the essential requirements of all relevant European Medical Device Directives, for example, a Covid-19 test kit product which has a CE marking is proof that it meets those requirements.

The zero rate of VAT applies to the supply and intra-Community acquisition of goods for use in the delivery of COVID-19 related health care services, including personal protection equipment, thermometers, sanitiser, medical ventilators, oxygen, breathing filters, etc.

Only COVID-19 vaccines authorised by the Commission or by Member States are eligible for the VAT exemptions. Approved vaccines are BioNTech and Pfizer, Moderna and AstraZeneca. The vaccines Johnson&Johnson and Sputnik V are currently under EMA review.

When did the Council Directive enter into force?

The Directive 2006/112/EC was published on 7 December 2020 and will enter into force on the day following its publication in the Official Journal of the European Union.

How long will the Council Directive apply?

The Directive will remain in place until 31 December 2022, or until an agreement is reached on the Commission's pending proposal for new rules on VAT rates if the latter occurs earlier.

Changes in Bulgaria

EU Member States can decide whether to apply a reduced rate or grant a VAT exemption. The laws, regulations and administrative provisions, which are adopted and published by the Member States and which are necessary to comply with the Directive, must contain a reference to the Directive or be accompanied by such a reference on the occasion of their official publication. Member States must determine how such a reference is to be made.

Member States are required to communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by the Directive within two months of their adoption.

On 8 December 2020 the Act Amending and Supplementing the Value Added Tax Act was published in the State Gazette, which adopted the amendments in question. From 1 January 2021, supplies, intra-community acquisitions and imports of in vitro diagnostics COVID-19 and COVID-19 vaccines, as well as other supplies closely related to diagnostics or vaccines, are exempt from VAT.

For further information, please reach out to Dennitsa Dimitrova or Nikol Nikolova.