The Spanish Council of Ministers today approved a Royal Decree to extend various price control measures for basic necessities. The measure was taken in the face of economic tensions caused by the Russian invasion of Ukraine and conflicts in the Middle East. According to the official statement from the Iberian government, today’s package is a legislative package that maintains VAT reductions on basic food products, which will continue to be taxed at 5% or 0%, depending on their type.
Olive oil, one of the most monitored products at this juncture, will now be included in this last group, with VAT at 0%: the definitive taxation upon expiry of these temporary reductions, which will last until September 2024, it will be 4% and not 10%. The reduction of VAT on basic food products, i.e. on the most important items in the shopping basket initiated by the government with the arrival of 2023, was one of the most effective measures to reduce inflationary pressures caused by the war in Ukraine, underlines the official government note. For this reason, the Iberian executive has since extended its effects, “which are temporary and will expire when the cost of these products normalizes”.
In the current price moment, the executive led prime minister Pedro Sanchez, “considers it necessary to extend this tax reduction to those to whom it has already been applied”. The government, adds the note, “even considers it appropriate to extend it to a key product such as olive oil: in this way, those that are considered basic food products, including milk, bread, vegetables, will be able to benefit from the tax reduction , fruit and vegetables and eggs, which will continue to be taxed at 0% VAT.” Furthermore, the executive note continues, “olive oil, a product that is part of a key sector for the Spanish economy”.
This is the second tax reduction for olive oil, since in the first package of anti-crisis measures VAT was reduced from 10% to 5%. In the measure approved today, other seed oils and pasta products will maintain the 5% VAT rate to which they are subject from 2023″. The reduction in VAT on olive oil, underlines the government note, “will further, since a reform of Law 37/1992, of 28 December 1992, on Value Added Tax will be promoted, so that the so-called ‘liquid gold’ becomes part of the group of basic food products and therefore has a VAT rate of 4%”.
This means that oil will no longer be subject to 10%, i.e. the rate applied before the government of Pedro Sanchez began to apply anti-crisis fiscal measures to combat the effects of war stress. “These reductions – underlines the note -, which from the beginning were temporary and represented a response to the sudden increase in inflation due to the consequences of the Russian invasion of Ukraine, will pass through two phases until the return to normal withdrawals:
- from July 1st to September 30th, the 0% rates will be maintained until September 30th: the 0% and 5% rates will remain unchanged;
- From October 1 to December 31, the 0% rate for basic food products will be 2% and the 5% rate will be 7.5%.”
“This gradual reversal of trend – the government note continues – responds to the mandate given by the European Commission to lighten the extraordinary measures adopted in previous years. As already indicated at the beginning of the implementation of this anti-crisis package, the Bill establishes that all the reductions in this regulatory framework must be applied to the final price of the product and are to the total benefit of consumers. Therefore, in no case must they have repercussions on any company profits, taking advantage of a more advantageous tax situation which is intended only and exclusively for the basket of consumers. consumers”.
