New VAT provisions for medical devices supplied during the COVID-19 emergency
Law Decree no. 34/2020 became Law no. 77/2020, which was published on the Official Italian Gazette no. 128 of 19 May 2020. It introduced a temporary VAT exemption regime for the supply of goods necessary/useful to combat the COVID-19 pandemic (for example, personal protective equipment, medical devices, and so on.).
This regime applies only to goods specifically listed in the Italian VAT law (n. 1-ter.1 Tabella A, Part II-bis). The list includes, among other items:
- Medical devices (for example, respirators for intensive and sub-intensive care);
- Masks, gloves, face shields, glasses/goggles, coveralls, and so on;
- Hand-washing soap; and
- COVID-19 test kits.
To correctly identify the goods for which the particular rule applies, the list also indicates the “TARIC” goods codes (taxation and EU customs codes).
To qualify for treatment under the regime, the sale of the listed goods must be made for “COVID-19 purposes”. If the sale qualifies for the regime it qualifies for the following treatment:
- Transactions carried out from 19 May 2020 (the date of publication of Law Decree no. 34/2020) up to and including 31 December 2020 are VAT exempt (with right of VAT deduction);
- Transactions carried out beginning 1 January 2021 will be subject to VAT at 5%.
Furthermore, until 31 October 2020 imports of goods included on the list are considered exempt for VAT purposes and from customs duties if they are imported by or behalf of:
- State organisations, including State bodies, public bodies, and other bodies governed by public law; and
- Other charitable or philanthropic organisations approved by the competent authorities.
As noted above, the conditions that must be satisfied for the application of such VAT treatment are: (i) the inclusion of the goods on the list, and (ii) the goods must be for “COVID-19 purposes”.
Given these requirements, we recommend that the purchase order specify the customer name and that the goods are related to the COVID-19 emergency. If the purpose for the transaction is not clear, the ordinary VAT treatment and VAT rates will apply to the sale, even if the goods are specifically included on the list.