From October 1st, 2024, shoppers will see higher prices on everyday essentials like bread, eggs, and olive oil as the Spanish government’s temporary VAT reduction comes to an end.
Initially introduced in January 2023, this cut aimed to mitigate the economic strain on families during a period of high inflation, largely driven by the Ukraine conflict. The move was part of broader economic measures that reduced the VAT on certain essential goods, such as olive oil and pasta, to alleviate household expenses.
VAT rates for basic foods to increase
The upcoming changes will see the VAT on olive oil return to 2%, marking the first increase since the tax rate was reduced to 0% in July. While this increase will last until the end of December, the final rate in 2025 will be set at a super-reduced rate of 4%, a notable reduction from the original 10%. Other essential foods like vegetables, fruits, and bread will also see their VAT rise to 2% until the end of the year.
Pasta and seed oils, which had their VAT lowered to 5% in early 2023, will experience a further increase to 7.5% starting in October.
Impact on household budgets
The end of the VAT cuts may hit consumers’ pockets, especially as inflation continues to affect food prices. Olive oil, in particular, has already seen significant price hikes. According to August 2024 data, its price has risen 25.1% in just a year, and a staggering 170.5% since January 2021, making it one of the fastest-increasing items in the shopping basket. Other food items, such as cereals, dairy, and vegetables, will also experience moderate price increases as the VAT changes take effect.
Also read: Spain extends VAT reduction on food due to persistently high prices
Spain extends VAT reduction on food due to persistently high prices