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"Reduced VAT" Rates on Food Stuffs, Pharmaceutical Products & Catering Services Introduced
The House of Representatives, from 10 January 2011, introduced a new legislation according to which a "reduced VAT" rate of 5% will apply on foodstuffs, pharmaceutical products and vaccines for medical and veterinary purposes that were previously rated at 0%. The Ministry of Finance justified these measures as being obligation of the Cyprus Government to comply with the EU objectives. Taxand Cyprus reviews the "reduced VAT rate" and its impact on taxpayers.
All foodstuffs will fall under the reduced VAT rate of 5%. Nevertheless, the only exception, which was and still remains, is that alcoholic products, wines, beer and refreshments, will be subject to the standard VAT rate of 15%.
The products that already fall under the VAT rate of 5% shall continue to be taxed accordingly. However, luxury foodstuffs (such as shrimps, mussels, lobster, caviar etc.), which had previously fallen under the standard VAT rate of 15%, will now fall under the reduced VAT rate of 5%.
The new legislation will probably serve its purpose and will bring more revenue to the country' budget. Nonetheless, the complete abolition of 0% VAT rate on essential products, such as foodstuffs, pharmaceutical products or vaccines has left Cypriot citizens worried. While the increase of VAT in 2011 has been introduced by many countries throughout Europe, Cyprus, among the EU countries, still remains to apply the lowest VAT rate of 15%.
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