In order to apply the reduced 12 percent value added tax (VAT) rate on fresh fruit and vegetables next year, the government needs to provide EUR 16 million in the budget for this purpose, Prime Minister Evika Silina (New Unity) told the media after a coalition meeting on Monday.
The government coalition announced the agreement on the reduced 12 percent VAT rate on fruit and vegetables at the end of October.
The current reduced rate of 5 percent expires this year. Previously, it was assumed that the VAT rate on fruit and vegetables would return to the full 21 percent next year, but now a compromise solution has been reached to apply a reduced VAT rate of 12 percent.
This compromise will cost EUR 16 million to the government budget, and the source of financing for the tax reduction has yet to be found, the prime minister noted. Compensatory mechanisms will have to be provided, so that the budget can be agreed with the European Commission, Silina said.
Given that such a measure still requires the alignment of financial sources, the government will prepare the proposal for the second reading of Latvia’s 2024 budget bill, Silina said earlier.
Previously, the prime minister said that the government coalition has agreed to only support local fruit and vegetable producers and not a wide range of producers.
The reduced 5 percent VAT rate on fresh fruit and vegetables is effective from January 1, 2018 to December 31, 2023.
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