A Look at how Value-Added Tax (VAT) and Reduced Rates are applied to EU Healthcare markets

In this article we will look at the basics of the EU VAT Directive, and the going rates in some EU countries for pharmaceutical and medicinal products.
Interesting to remember, is that the EU VAT Directive reduces the standardized mandated EU rate for certain branches of the economy, to allow them greater market flexibility and lower prices when wanted.

EU VAT Directive and healthcare sector exemptions

The EU VAT Directive establishes the VAT rates and its framework in the European Union. It provides guidelines that grant a degree of flexibility and control over market dynamics for the various participating national governments, by allowing them to set their VAT rates as they see favorable for particular categories of products and services. Two basic rules apply:

A standardized EU rate must be applied to all goods and services

  • This cannot be less than 15%
  • Currently this standard rate ranges from 17% in Luxembourg to 25%, e.g. in Sweden and Croatia

An EU nation is allowed to apply 1 to 2 reduced VAT rates to a particular range of products within established categories.

Para 3 – pharmaceutical products of a kind normally used for health care, prevention of illnesses and as treatment for medical and veterinary purposes, including products used for contraception and sanitary protection

Para 4 – medical equipment, aids and other appliances normally intended to alleviate or treat disability, for the exclusive personal use of the disabled, including the repair of such goods

Para 15 – supply of goods and services by organizations recognized as being devoted to social well-being by Member States and engaged in welfare or social security work, in so far as those transactions are not exempt pursuant to Articles 132, 135 and 136.

Para 17 – provision of medical and dental care and thermal treatment in so far as those services are not exempt pursuant to points (b) to (e) of Article 132(1).

There are further VAT exceptions in the Directive for particular activities that are of interest to public well-being. Those relevant to healthcare are:

  • For establishments, bodies and related activities governed by public law or similarly of a social nature, pertinent to healthcare, including hospitals, centers for medical treatment, and medical care
  • Provisions of -and related- medical and paramedical care by professionals as defined by the nation
  • The supply of blood and human organs

Reduced VAT rates in Europe

It is clear from the exceptions listed above that medical needs, an inherently human welfare-based market, is treated particularly carefully, and included widely in exempting clauses in an attempt to reduce the end cost for the users and stimulate the market dynamics.

The following table gives an insight into the reduced VAT rates applied by various European nations.



Pharmaceuticals, medical

Pharmaceuticals, medical

Czech Republic
Particular medicines and medical supplies
– pharmaceuticals, medical

No reduced VAT

Pharmaceuticals, medical


Pharmaceuticals, medical

Pharmaceuticals, medical

United Kingdom
Pharmaceuticals, medical

An example of reduced VAT in Czech Republic

In 2015 the Czech government applied a reduced VAT rate to pharmaceuticals and other medicinal products in line with the EU VAT Directive. The 10% rate applied to some products is estimated to result in a direct income loss of € 111 million. It is expected to stimulate demand and consumption due to lowered prices, and enhance the conditions for businesses to perform and profit.

For further quantitative and qualitative information on the Czech Republic healthcare system and the macroeconomic climate, or that of other national healthcare systems, please look into our Business intelligence platform or order the TforG Deep Dive report for the Czech Republic containing volumes of 984 surgical procedures in 13 specialisms.

About Laura Weynants

Performs primary and secondary market research to create country reports at TforG. Interviews KOLs and medical sector professionals to build on TforG’s healthcare market expertise and competence networks. Complementing five years of sustainability policy and CSR communication, she now focuses on grasping key medical market trends, structures and opportunities in medical sectors worldwide. Coming from an international background of living in Germany, Spain, USA, UK and Belgium, she has gained a keen insight in international organizations and language skills to perform first hand investigations. She graduated from Sussex University Brighton, UK with a BA English Literature and Sociology and achieved a Master Degree in Sustainability and Corporate Social Responsibility in EOI Business School in Madrid, Spain.