Spain ends on Tuesday with zero VAT on some foods and hopes to restore all normal values of this tax by the end of 2024, thus ending almost three years of extraordinary measures to control inflation.
The Government of Spain adopted packages to respond to the rise in prices after, in the first half of 2022, having some of the highest values in the European Union (EU) and in July of that year having the highest inflation in the country since 1984 (10, 77%). 2022 ended up with the lowest inflation in the EU (5.7%) and last year the rate continued to fall, despite some fluctuations, reaching 3.1% in December.
According to the most recent data from national and European authorities, inflation in Spain was 2.3% in August, close to the EU average (2.4%). The Bank of Spain’s estimate is that inflation will moderate to 2.9% this year, to 2.1% in 2025 and to 1.8% in 2026.
In 2022, Spain approved several packages to respond to inflation exceeding 3% of the Gross Domestic Product (GDP), with a value of around 45,000 million euros, including direct aid to consumers and companies and tax benefits, such as the reduction of VAT of electricity and gas or a discount on the purchase of fuel.
Among the measures that have been adopted, and which remain in force, are reduced VAT rates on some foods. Thus, foods considered essential (milk, bread, eggs, vegetables, fruits) have been subject to zero VAT in Spain since January 2023. Olive oil became part of this food group on July 1st of this year.
However, from Tuesday until December 31st, these foods will have 2% VAT, with the Spanish Government estimating that they will return to the usual rate of 4% from January 1st, 2025, meeting forecasts of inflation moderation.
Another group of foods, such as pasta and oils of vegetable origin, have VAT reduced by 5%. On Tuesday, VAT on these products will rise to 7.5% before returning to the normal 10%, predictably, on January 1, 2015.
Discounts on bills and reduced VAT rates on electricity are also still in force until the end of the year (which was 5% in Spain in 2022 and 2023 and increased to 10% this year). Discounts on public transport passes and tolls also remain in force until December.
When it decided to extend these measures for the last time, in the middle of this year, the Spanish Government assured that it was taking into consideration the European Commission’s request to lift the extraordinary support adopted at national level to respond to the rise in inflation and hence the terms in that the extension of some measures and their progressive end were approved.
