PM Siliņa: reduced VAT on produce will need EUR 16 million

In order to apply the reduced value-added tax (VAT) rate of 12% to fresh fruit and vegetables in Latvia next year, it will need EUR 16 million in the budget, Prime Minister Evika Siliņa (New Unity) said on Monday after the coalition meeting.

The coalition announced the agreement to apply the 12% rate in late October.

The application of the 5% reduced rate will end this year. Consequently, Siliņa said, it was originally envisaged that a standard 21% rate would apply to fruit and vegetables from 2024. But the coalition agreed to a compromise a few weeks ago - a 12% VAT rate.

This compromise will cost €16 million and still needs to find financial sources, the Prime Minister noted. The government will have to seek compensatory mechanisms for this amount in order to align the budget with the European Commission, Silins noted.

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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