Cheaper sanitary products in the EU? Member states can opt for “full VAT exemption”

22 Aug 2022 --- EU member states can now choose to entirely exempt value-added tax (VAT) on female sanitary products, as they are considered basic needs. Following the implementation of the Period Products Act in Scotland last week, which makes it the first country to legalize free period products, PersonalCareInsights examines the possibility of free sanitary products and reduced tampon tax in the EU.

“Female sanitary products were already included in the list of goods to which a reduced rate as low as 5% could be applied under the former rules,” an EU official tells PersonalCareInsights. Under the system, updated in April, “new rules on VAT were formally adopted by EU finance ministers.”

“Pharmaceutical products used for medical and veterinary purposes, including products used for contraception, female sanitary protection and absorbent hygiene products,” are now open to a VAT exemption outlined under the new rules.

The Council Directive on the amendments for VAT justifies that it is appropriate for EU countries to apply reduced rates to strengthen the resilience of health systems.Products used for female sanitary protection and absorbent hygiene products are open to a VAT exemption.

Changes under the new system
The EU official explains that member states will continue applying a standard VAT rate above 15%.

“However, they will now also have the possibility to apply two reduced rates as low as 5% to goods and services in up to 24 categories included in an updated and modernized Annex III of the VAT Directive” – under which sanitary products are included.

“Another novelty is that, for the first time, member states may apply one reduced rate lower than 5% and one exemption (‘zero rate’) to a maximum of seven categories on the list considered to cover basic needs, e.g., foodstuffs, medicines, pharmaceutical products,” adds the EU official.

Additionally, they explain that at the same time, several items considered detrimental to the environment and the EU’s climate change objectives have been excluded from Annex III.

P&G voices support
Procter & Gamble (P&G) is one of the largest producers of feminine care products, featuring brands like Always, Just, Tampax and This is L under its portfolio.

“At P&G, we believe in providing easier access to the period products needed,” Charlotte d’Elloy, brand director of feminine care at P&G, tells PersonalCareInsights.Member states can apply one reduced rate lower than 5% and one exemption to a maximum of seven categories.

“We are therefore appreciative of any efforts to make period protection products more accessible to more people that need them so that they can continue to reach their full potential.”

Additionally, she shares that the company has been combating period poverty since 2018 and has donated more than 160 million products globally through its End Period Poverty program.

“In the Netherlands, the program has been running since 2020, in partnership with NGOs – Voedselbanken Nederland and Nationaal Fonds Kinderhulp.”

“Inequalities between the Member States”
The EU official explains that under the former rules on the reduced rates and exemptions, member states could apply a standard rate – above 15% to all goods and services.

“Member states could choose to apply a maximum of two reduced rates at different levels but as low as 5% to any item of a predefined list of goods and services (Annex III of the VAT Directive).”

“Several further reduced rates (lower than 5%) and exemptions were allowed in certain countries owing to historical ‘standstill derogations’ agreed when they joined the EU. Only one member state – Ireland – had a zero rate on sanitary products,” the official continues.

As a result, over time, it led to a patchwork of rates that varied from one country to the other, explains the official. “It has also created inequalities between the member states. Some member states enjoyed derogations, while others were not allowed to apply a reduced or zero rate to the same goods or services.”

By Venya Patel

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