Supermarkets apply VAT reductions on essential foods

The price of bread, milk, eggs, fruit, vegetables and legumes dropped slightly on Monday morning as supermarkets reopened and began to apply VAT reductions on essential goods.

Those foods are now VAT-free having previously been taxed at 4%, while VAT on oils such as olive oil and fresh pasta has dropped from 10% to 5%.

The measure, in place from January 1 to June 30, or until inflation falls below 5.5%, is the most prominent of the anti-crisis package approved by the Spanish cabinet last Tuesday.

All non-essential food products are taxed at 10% while VAT on drinks with sugar and sweeteners and alcoholic beverages is 21%.

Short turnaround

"The turnaround time has been very short," Bonpreu's head of operations, Joan Sabartes, told the Catalan News Agency (ACN). "There just a few days to have everything ready."

Sabartes also explained that the company does not expect the VAT reductions to have a major impact on customers' purchasing behaviour. "People are very clear about what they buy. If someone usually buys a kilo of peppers or courgettes, they won't buy more because VAT is at 0%."

The reduction in VAT will continue until June 30 or until underlying inflation falls below 5.5%, the Spanish government has said. 

The measures approved as part of the latest anti-crisis package, which also includes a new food subsidy of €200 for families earning less than €27,000 per year, add up to €10bn.

In total, six packages of measures worth €45bn have been approved by the Spanish government since March 2022, in order to tackle the inflation crisis and the economic effects of Russia’s invasion of Ukraine.