Portugal extends VAT holiday on “essential” food products

Portugal has decided to extend the zero Value Added Tax (VAT) rate on a selection of "essential" food items until the end of the year.

This move, initially introduced in April for a six-month period, encompasses 46 everyday food products, including fruits, vegetables, meat, fish, dairy products, and bread.

Mariana Vieira da Silva, the Minister of the Presidency, disclosed this extension of the VAT exemption after it received approval from the Council of Ministers.

According to the government's statement, the initial implementation of zero VAT resulted in nearly a 10% reduction in consumer prices between April 17th and August 28th.

In a subsequent press conference, Minister da Silva characterized the VAT measure as a "success," noting that it had effectively and proportionally reduced the cost of essential, healthy food items.

The assessment of this impact was carried out by Portugal's Economic and Food Safety Authority (ASAE).

Furthermore, Minister da Silva pointed out that food inflation in Portugal decreased to 7.3% in August, down from 8.6% prior to the introduction of zero VAT in April.

However, she emphasized that the rate of price increases was "still higher than our medium-term objective," leading to the decision to extend the tax relief until the end of the year.

The government's statement highlighted that the zero VAT initiative emerged as a result of a partnership between the government and the food production and distribution sectors, aimed at mitigating the impact of inflation on family incomes.

Notably, France has also taken steps to address high food costs by reaching an agreement with producers to either freeze or reduce prices on various goods, including food.

Hungary had previously implemented a price capping program, which concluded in August and was replaced by an alternative scheme in June that increased the mandatory discounts levy from 10% to 15% for a selection of 20 food items.