0% VAT with more price reductions on foodstuffs to last six months

The pact on zero VAT, signed between the government, retail distribution (APED) and farmers (CAP), is expected to last for six months, with enhanced commercial promotions and a new commission that will ensure price reductions.

“The present pact will be in force for a period of six months from the date it is signed and will be subject to mid-term evaluation after three months,” reads the document, to which Lusa had access, which was signed on Monday evening by the prime minister, António Costa, and by representatives of the Portuguese association of retail distribution companies (APED) and the confederation of Portuguese farmers (CAP).

Distribution commits in the pact signed, to reduce the price of the 44 food products exempt from VAT listed in the annex to the document, not incorporating the decrease in tax in the commercial margin, and to strengthen commercial campaigns, “for a minimum period of six months,” on sales prices exempt from VAT, with a view to promoting these sales and thus “contribute to the stabilisation” of prices, within the legal limits.

The pact signed also provides for the creation of a monitoring commission, with a view to “overseeing the implementation of the commitments” of the agreement, with the parties committing to working together to share information.

In the annex to the pact, the list of products with zero VAT includes bread, potatoes, pasta and rice.

As for vegetables, onions, tomatoes, cauliflower, lettuce, broccoli, carrots, courgettes, leeks, pumpkin, greens, Portuguese cabbage, spinach and turnips.

In fruits, zero VAT is foreseen for apples, bananas, oranges, pears and melons

In pulses, red beans, cowpeas, chickpeas and peas.

Dairy products include cow’s milk, yoghurts and cheese.

There is also zero VAT on pork, chicken, turkey meat, beef.

Fish includes cod, sardines, hake, horse mackerel, canned tuna, sea bream and mackerel.

Zero VAT is also provided for hen eggs and, in fats and oils, for olive oil, vegetable oils and butter.

The alteration to the VAT rate of these 44 foods, a basket of food items considered indispensable to the healthy diet of families, will still be subject to approval by the Cabinet.

The application of a 0% VAT rate to this basket and the reinforcement of support for production will cost around €600 million, announced the prime minister, António Costa, in Lisbon, at the ceremony to sign the pact.