Portugal to extend zero VAT rate on basic food until end 2023

The Portuguese government on Thursday will extend the zero rate of value-added tax (VAT) on basic food staples by two months to the end of 2023 to help families deal with persistent inflation, Prime Minister Antonio Costa said.

The government slashed the VAT rate to 0% in April from 6% on a list of 46 basic foods, including milk, bread, rice, tomatoes, and some meat and fish.

The tax cut was set to expire at the end of October.

At a meeting of the Socialist Party late on Wednesday, Costa said the government will approve the extension until Dec. 31 as it had yielded positive results.

“The measure contributed to reducing prices. We want to keep controlling the price of essential food products to help Portuguese families,” he said.

Costa said that data from Portugal’s biggest consumer protection association, Deco, showed prices of the staples included in the basket fell 7.94% between August and April.

Inflation in Portugal had been falling steadily. After peaking at 10.1% in October 2022 – the highest in more than three decades – it dropped to 3.7% in August.

Costa also said the government plans to pass new measures later this month to support families hit by higher interest rates.