VAT on foods lowered from Monday, January 2 as stores reopen across Spain

The reduction in VAT on foods introduced by the government took effect from January 1, but will only be lowered from Monday, January 2 as stores across the country reopen.

The reduction approved by Royal Decree sees VAT on legumes, potatoes and tubers, milk, cheese, eggs, vegetables and fruits, cereals, bread and bread-making flour abolished.

Until now these all attracted VAT at four per cent, but will now remain VAT free for the next six months or until core inflation falls below 5.5 per cent. Currently, the CPI is at 6.9 per cent.

VAT on olive oil and pasta also falls from today going from 10 to five per cent whilst VAT on all other foodstuffs remains unchanged.

According to the news channel La Vanguardia, the average shopping basket is 13 per cent more expensive than this time last year costing the average family of four around €315 extra.

The reductions in VAT, although small, do go some way to reduce the effect of the enormous increases seen on products like olive oil (25 per cent), eggs (27 per cent), milk (30 per cent) and cereals (37 per cent). The government hopes that the broad range of reductions will have a greater impact than the big increase in the cost of individual products.

The reductions

1. Foods reduced from four to zero per cent

Legumes, potatoes and tubers, cereals, bread, flour, vegetables and fruits, cheese, eggs and milk

2. Foods reduced from ten to five per cent

Vegetable oils and pasta

The food industry will, however, be required to absorb the new tax on plastic, which it had asked the government to delay for one year. The new tax rate of €0.45 per kilogram will raise around €690 million according to industry sources. They believe this cost will counter some of the reductions in VAT on foods as it will inevitably push up prices.

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