VAT rates on foods to decrease in Slovakia

09 July 2015

Bibiana Mozoľová, Katarina Bujnakova

The Food Chamber of Slovakia has long been aware of the fact that Slovakia has one of the highest value added tax (VAT) rates on foods within the EU. Slovak food producers are at a competitive disadvantage since their input costs are far higher than those of producers from other countries. Consumers see the effects of this on prices at point of sale.

According to the European Commission, Slovakia's 20% VAT on food is among the highest in the EU (VAT Rates Applied in the Member States of the EU). Several EU Member States apply reduced VAT on foods, and in some countries even no VAT is applied. In comparison with Visegrad Group countries Slovakia's VAT rate is the highest. Neighbouring Poland has a lower VAT rate on food and soft drinks at 5%, with 15% in the Czech Republic and 18% in Hungary.

In comparison with Slovakia, higher VAT on food occurs only in

  • Denmark (25%);
  • Romania (24%); and
  • Lithuania and Lativa (both 21%)

    The UK and Malta do not apply any VAT on food.

    Relatively low VAT rates on food are applied in

    • Luxembourg - 3% on basic foodstuffs;
    • Spain - 4% on basic foodstuffs;
    • the Netherlands - 6% on food;
    • Belgium - 12% on food and 6% on basic foodstuffs;
    • Germany - 7 % on basic foodstuffs; and
    • Austria - 10% on food.1

    In April 2015, Slovak Prime Minister Robert Fico announced a reduction of VAT on basic foodstuffs (20% to 10%). Prime Minister Fico is Chairman of the governing party SMER-SD, which has an absolute majority in the National Council of Slovakia, and is focused on inter alia socially-oriented changes and amendments. The reduction is part of the government's so-called second social package, which will also include projects designed to support economic growth in Slovakia.

    The reduction of VAT on basic foodstuffs is welcomed by the Food Chamber of Slovakia, as well as the Slovak Agriculture and Food Chamber. The Food Chamber of Slovakia is convinced that the reduced VAT on basic foodstuffs will positively influence the behaviour of consumers, and thus help to reduce foreign purchases, since many products in neighbouring Austria are cheaper due to the reduced VAT rate.

    This is not the first attempt in Slovakia to decrease the VAT on food. Unfortunately previous attempts failed due to lack of political will. Given the political power that the government has in the National Council it is now more than likely that this package will be adopted.

    If the State reduces VAT on basic foodstuffs, however, this would not mean an automatic reduction in prices in shops according to the Ministry of Finance of Slovakia. In practice, based on foreign experience, such as that in Latvia or Hungary, if retailers reduce prices by as much as the VAT decrease, the same purchase price will drop by 54 cents.

    [1] Information from EC document - VAT Rates Applied in the Member States of the EU - http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf

    Authors

    Image of Katarina Bujnakova

    Katarína Pfeffer

    Associate
    Czech Republic & Slovakia

    Call me on: +421 232 332 800