The current VAT reduction on food that is in place in Spain, as a result of the current cost of living crisis, was due to expire on 30th June.
The VAT reduction on a list of selected basic food items was originally introduced on January 1st 2023 to alleviate the inflationary consequences of the war in Ukraine. Food prices across Europe increased as a result of the conflict, with the import of products necessary to the food supply chain being suspended from both Russia and Ukraine.
The reduction was only intended to be a short-term measure, but now it has been confirmed that it will be extended beyond the original end date. Here’s everything you need to know:
When Has the VAT Reduction Been Extended To?
No end date for the extension has currently been set. The first vice president and Minister for Economic Affairs, Nadia Calviño, confirmed the plan when speaking at a press conference on her recent trip to New York, but would not give a date when asked how long the extension would be in place for. She simply states that the Spanish government would maintain the de facto reduction for as long as food prices were unsustainably high in the country.
This was confirmed in the statement: “We will maintain the VAT reduction on food until more appropriate price levels are reached."
We expect that more will be known about the details of this extension, including the end date, when the current decree expires at the end of June and a new one is written to replace it.
What Does The VAT Reduction Cover?
The VAT reduction is intended to lower the cost of everyday essential foods such as bread, milk, cheese, eggs, cereals and fruit and vegetables. On these products the VAT rate has been lowered from 4% to 0%. Oil and pasta, which are also considered essential in the region, have seen their VAT rate lowered from 10% to 5%.
Whilst prices for these products are still much higher than they were 12 months ago, the reduction in the VAT rate for these goods is intended to ensure that they remain affordable for as many families as possible.
What Other Measures Against Inflation Have the Spanish Government Introduced?
These aren’t the only measures against inflation that have been introduced by the Spanish government in recent months.
One of the most significant of these other measures is a reduction in the cost of public transport in Spain. The scheme that has seen free train tickets on Cercanías, Rodalies (Catalonia) and Media Distancia, as well as on certain bus lines has been extended by the Spanish government.
According to socialist sources, the reason that this system has been extended is that the free ticket system "has worked and has been accepted by the public, with more than 2.4 million season tickets issued”.
We don’t yet know if the 50% discount the government offered on season ticket prices for those using urban public transportation will be extended. The current scheme that is in place is also due to expire on 30th June. It is likely that this will be assessed on a region-by-region basis, with local governments taking the helm of the decision making process.
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