Background information

On 2 May 2023, the Cabinet issued a decree that amends the VAT legislation to apply a zero rate of VAT to supplies of certain essential goods. The aim of the measure is to relieve households from the increasing prices of essential goods due to the economic impacts of the pandemic and the war in Ukraine.

Content of measure

The list of the essential goods included in the Zero VAT list are:

• Bread: all types of bread, fresh or frozen, with or without yeast (e.g., white, black, wholemeal, multigrain, peasant, rye, rye bread, corn bread, baguette, ciabatta, bread in fritters, loaves, bread rolls, pitta bread). Bakery products with added ingredients such as raisins, nuts, flavourings are excluded from the list.
• Milk: fresh milk (e.g., cow's milk, goat's milk, sheep's milk), sweetened milk, condensed, long-life, flavoured milk (e.g., chocolate, banana), plant milk (e.g., almond, soy, rice).
• Eggs
• Baby food: powdered, dry and/or liquid food intended for consumption by children. Snacks (e.g., chips, dry or powdered food, dried food, nuts, candy, chocolate, ice cream etc.) are excluded from the list.
• Children's diapers
• Products for feminine hygiene protection (tampons, sanitary towels, sanitary napkins)
• Adult diapers

This measure is expected to cost €11 million.

Use of measure

No information available.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Does not apply to businesses	Applies to all citizens

Actors and funding

Actors	Funding
National government	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	No involvement	No involvement
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: N/A

Involvement

The measure was designed by the Ministry of Finance and the Tax Department and upon the decision of the members of the Cabinet; no social partner or political party has been invited to participate in any kind of consultation. However, the measure emerged after the pressure that civil society, political parties and the union movement exercised to the government to take measure in order to relieve consumers from the increased prices.

Views and reactions

Social partners, political parties and the consumers’ associations welcomed the decision of the government. At the same time, they highlighted the necessity for inspections for the right implementation of the measure by the providers of the essential goods in the list. They also pointed out the need for the expansion of the essential goods with zero VAT.

Sources

• 02 May 2023: Μηδενικός Συντελεστής ΦΠΑ σε Βασικά Είδη (www.mof.gov.cy)