SEAP Fiscal Structures: VAT Exemptions for NATO‑Allied Procurement
Decoupling Acquisition Costs: The Impact of Regulation (EU) 2025/2643 on Transatlantic Defense Supply Chains
The current evolution of the European defense sector is defined by a shift from simple policy coordination to sophisticated fiscal engineering. A primary mechanism for this transition is the harmonization of tax exemptions between NATO operations and the EU’s Common Security and Defence Policy (CSDP). Under the legal framework of Article 151(1) of Directive 2006/112/EC (the VAT Directive), supplies destined for armed forces participating in a joint defense effort outside their national territory are shielded from value-added tax. This principle, reinforced by Directive (EU) 2019/2235, creates a tax-neutral perimeter designed to prevent the erosion of defense budgets through internal tax recycling. For professional procurement officers and CFOs, this harmonization ensures that capital is directed toward frontline capability rather than secondary logistical levies.
Regulation (EU) 2025/2643 (EDIP) operationalizes this zero-rated logic for the acquisition phase through the introduction of the Structure for European Armament Programme (SEAP). By granting a SEAP the legal status of an “international body,” the European Defence Industry Programme enables consortia of at least three Member States to bypass the standard VAT and excise duties that typically burden national acquisitions. While the SAFE instrument (Regulation (EU) 2025/1106) provides the liquidity for production ramp-up through debt guarantees, the SEAP framework provides the structural tax advantage for the final purchase. The financial modeling is definitive: a direct import from a non-associated third country, such as the United States, triggers an unrecoverable fiscal load of 20% to 25% due to import VAT and applicable duties. Conversely, procurement channeled through a SEAP enables a de facto 0% tax environment. This structural price delta functions as a strategic industrial filter, prioritizing jointly owned European assets and requiring non-EU firms to integrate into localized joint ventures to maintain price parity in the Union’s procurement cycles.