Filenews 2 June 2023
The list of products on which the Republic will be asked to reduce VAT is ready, as part of measures to tackle the high prices that afflict thousands of households.
According to information provided by "F", the Ministry of Finance has completed its study and determined the products on which VAT will be reduced. A competent source told "F" that under the new regulation a new VAT rate will be introduced, which will be at 3%. We have also been told that the European Commission seems to be in favour of creating a new rate of 3%.
Currently, three VAT rates are applied in Cyprus, zero, 5% and 19%. The majority of food in our country is subject to 5% VAT, however there are also some consumer goods that are taxed at 19%. Essentially, with the reduction of VAT, a 3% reduction will be imposed on a significant number of foodstuffs or other consumer products, while it is envisaged that VAT will be reduced to zero on some other products.
A competent source explained to "F" that the reduction of VAT will concern products that have particular weight in the household basket. In fact, due to the expected adoption of the new VAT rate, the Ministry of Finance will soon submit a relevant bill to Parliament, which will include the list of products that will benefit.
This tax relief is expected to be temporary. The measure to reduce VAT on products follows last month's zeroing of VAT on seven other product categories. Essentially, 1800 product labels were affected by the nihilism, concerning bread, milk, eggs, baby food and diapers, products for feminine hygienic protection, as well as adult diapers.
It is worth noting that zero VAT will be applied for a period of six months, i.e. until October 31, with the possibility of renewal. It is recalled that VAT was reduced to zero on the basis of European Directive 2022/542, which now allows member states to reduce or eliminate VAT on certain consumer products. The budgetary cost for the implementation of the existing measures is expected to amount to approximately €11 million.
