Zero VAT on food approved by the Portuguese Government

A list of 44 essential products will have zero VAT. Supermarkets will have 15 days to adjust prices.

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17 April 2023, 14:30

The Portuguese Government has approved a draft law to reduce VAT on food products, which will now be submitted to Parliament for consideration. The application of a 0% VAT rate in a shopping basket of 44 essential food products and the reinforcement of support to production will cost about 600 million euros.

Zero VAT on some Portuguese food items

The Council of Ministers met to approve the draft law that provides for the transitional application of a Value Added Tax (VAT) exemption, between April and October, to food products from the healthy essential food basket, as a measure to respond to the extraordinary increase in food prices in Portugal.

"As part of the strategy reflected in the Pact for the stabilisation and reduction of food prices, in conjunction with the food production and distribution sectors, this decree will apply, for a period of six months, a zero VAT rate on a basket of food products defined on the basis of health criteria and consumption patterns of families in Portugal," the statement from the extraordinary Council of Ministers reads.

According to the Portuguese Prime Minister, António Costa, this shopping basket was built based on a list drawn up by the Ministry of Health from the food wheel. Then, the Portuguese Association of Distribution Companies (APED) provided the list of the goods most consumed by the Portuguese.

"From the crossing of these two lists, to have a healthy basket and to correspond, as far as possible, to the food items most consumed by the Portuguese, and also taking into account the availability of the State, a basket was designed", he stressed.

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Supermarkets in Portugal will have 15 days to lower prices

In his speech, the Prime Minister warned against "two illusions". The first, he said, is that the reduction will be automatic. It will not be, since the reduction of VAT requires the approval of a law by Parliament. "The Government will approve the Bill today and send it to Parliament tomorrow, where it will have to be tabled, discussed and approved, and promulgated by the President of the Republic. Food retailers will have adjusted prices 15 days after the publication of the law," he said.

The second illusion is that after this prices will not increase again, because "nobody knows how long this war will continue and as long as it continues there is the risk that production costs will increase further," he said.

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António Costa recalled the popular saying "a house where there is no bread, everyone scolds and no one is right", noting that "where there is inflation, everyone scolds and everyone is right", namely "consumers who feel on a daily basis the increase in the costs of goods, namely food", producers, "who have faced an increase in the costs of fertilisers, animal feed, and energy", distribution companies "with the increase in the costs of their suppliers" and "supervisory bodies when they detect incorrect commercial practices".

In this sense, prices will be monitored, and in addition to the Food and Economic Security Authority (ASAE), the Competition Authority (PCA) will also play an active role.