Greece Extends Temporary Reduced VAT for Taxis and Other Key Services While Making Some Cuts Permanent
The Greek Ministry of Finance has announced an extension of the temporary reduced VAT rate for several essential goods and services, continuing a measure that was originally introduced in response to the economic impact of COVID-19. The extension, included in the 2024 Budget, ensures that key supplies such as taxis and self-serve coffee will benefit from a lower VAT rate until at least 30 June 2024. Additionally, some reductions are now set to become permanent, marking a significant shift in Greece’s VAT compliance framework.
A Sixth Extension for Greece Temporary Reduced VAT Rate
Initially introduced in June 2020 as a response to the pandemic’s economic challenges, Greece’s temporary reduced VAT measures have undergone multiple extensions due to continued financial pressures. The latest extension marks the sixth time that the government has chosen to prolong the lower VAT rate on certain categories of goods and services.
Under the 2024 Budget, the following supplies will continue to benefit from a reduced VAT rate until mid-2024:
Taxi services
Self-serve coffee and certain non-alcoholic beverages
This extension provides relief to businesses and consumers, particularly in the transportation and hospitality industries, which have struggled with economic uncertainty, inflation, and fluctuating demand since the onset of the pandemic.
Permanent VAT Reductions for Key Sectors
While some VAT reductions remain temporary, the Greek government has now proposed making certain reductions permanent. This decision impacts a range of industries and consumer services, reinforcing the government’s strategy to stimulate economic activity and ease financial burdens for both businesses and consumers. The permanent VAT reductions apply to:
Urban, suburban, land, and railway transport – Public transportation services will continue to benefit from a lower VAT rate, which aims to promote sustainable travel and ease commuter costs.
Tourism packages – A key driver of Greece’s economy, the tourism sector will see continued support through reduced VAT on travel packages, making Greece a more attractive destination.
Gyms and fitness centers – The fitness industry, which suffered major losses during pandemic-related lockdowns, will benefit from permanently reduced VAT rates, encouraging public engagement in health and wellness.
Various health supplies – Certain medical and health-related supplies will maintain their reduced VAT rate, improving affordability for consumers in need of essential healthcare products.
Cinemas and theatre tickets – Cultural and entertainment sectors, which were among the hardest hit during the pandemic, will benefit from a permanently lower VAT rate, making leisure activities more accessible to the public.
These permanent VAT reductions provide long-term relief for industries critical to Greece’s economic recovery and social well-being. By incorporating these changes into the VAT compliance framework, the government ensures that businesses in these sectors can continue to operate under favorable conditions.
Reinstating a Higher VAT Rate for Soft Drinks
While several reductions have been extended or made permanent, the Greek government has opted to restore the standard VAT rate of 24% on soft drinks served in commercial establishments. This decision reverses previous tax relief for non-alcoholic beverages other than water, reflecting a shift in fiscal priorities.
Background: Inflation and VAT Compliance Policy Adjustments
Greece’s decision to extend and adjust its VAT rates stems from ongoing economic pressures, including rising inflation. In September 2022, inflation surged to 11.2%, prompting the government to prolong reduced VAT rates on key supplies for the fourth time. These extensions were originally intended as temporary relief measures in response to the COVID-19 crisis but have now become a crucial component of the country’s VAT compliance strategy.
When first introduced in June 2020, Greece’s temporary reduced VAT aimed to support businesses and consumers affected by pandemic-related economic disruptions. The reduction lowered the VAT rate on select goods and services from 24% to 13%, with an initial expiration date set for April 2021. However, due to economic conditions, the deadline was extended multiple times, including in October 2021 and again in June 2022.
The categories of supplies affected by previous VAT reductions included:
Coffee
Transport services
Non-alcoholic beverages
Catering and restaurant services
Cinemas and cultural entertainment
Gyms and dance schools
Tourism and travel packages
Why the VAT Extensions Continue
The ongoing extension of Greece’s temporary reduced VAT highlights the government’s concern over economic stability amid global financial challenges. Inflationary pressures, rising costs for raw materials, and increased energy prices continue to impact businesses and consumers. By extending the VAT reductions, Greece aims to ease financial strain, maintain consumer spending, and support key industries.
Moreover, making some reductions permanent reflects a strategic shift in Greece’s VAT compliance approach. By stabilizing VAT rates in essential sectors such as public transport, tourism, and healthcare, the government seeks to provide predictability for businesses and improve economic resilience.
Impact on Businesses and VAT Compliance
The adjustments in VAT rates require businesses operating in affected sectors to update their tax policies to ensure compliance. Companies in transportation, tourism, hospitality, fitness, and entertainment must align their VAT reporting with the latest regulations. Businesses serving soft drinks must also prepare for the reinstated 24% VAT rate.
For businesses navigating Greece’s evolving VAT compliance landscape, staying informed about these changes is critical. Compliance with VAT regulations is essential to avoid penalties and optimize financial planning. Companies should work closely with tax professionals and leverage VAT compliance technology to ensure accurate reporting and adherence to Greece’s updated tax policies.
Conclusion
The extension of Greece’s temporary reduced VAT, along with permanent reductions for key sectors, demonstrates the government’s commitment to economic recovery and consumer relief. However, the reinstatement of the 24% VAT rate on soft drinks signals a shift toward fiscal recalibration. As VAT compliance regulations continue to evolve, businesses must remain vigilant and adapt their tax strategies accordingly.
For those impacted by these changes, understanding Greece’s VAT compliance framework and keeping up with policy updates will be crucial for long-term financial stability and regulatory adherence. Whether through leveraging tax technology or consulting VAT compliance experts, businesses must proactively manage their VAT obligations in the face of ongoing economic adjustments.
