Coalition agrees 12% VAT rate on fruit and vegetables

A reduced rate of value added tax (VAT) of 12% will be applied to fresh fruits and vegetables in Latvia next year, Prime Minister Evika Siliņa (New Unity) told the media on Monday about an agreement reached among the coalition parties.

The government will prepare the relevant proposal for the second reading of the state budget for 2024, said Siliņa.

For the last several years, a reduced VAT rate of 5% has been applied to fresh fruits and vegetables in Latvia. However, that rate is set to lapse at the end of this year.

Previously, it was assumed that in the next year's budget the VAT rate for fruits and vegetables would return to the full rate – 21% – but now a compromise has been found to set the reduced VAT rate at 12% next year.

It is understood the rate will only apply to local fruit and vegetable producers, not the wider food supply chain.

If and when it is approved by Saeima during the forthcoming budget debates, the VAT rate of 5% for fruits and vegetables will be valid from January 1.

The reduced VAT rate of  5%, instead of 21%, for fresh vegetables, berries and fruits for the duration of a pilot project was introduced in 2018. The reduced VAT rate was intended for three years. In 2020, the Ministry of Agriculture concluded that the criteria had been met with success, while the Ministry of Finance considered that the pilot project was not a success. However, the government  agreed to roll over the reduced VAT rate until the end of 2023.

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