Spiralling inflation prompts cuts on basic foodstuffs, gas and heating
Croatia is the latest country cutting VAT on heating and food as its main inflation rate hits record levels. Its headline inflation rate has hit 5.5%, with heating and other basics being many times higher.
VAT cuts to basics from 1 April 2022
The changes, costing Kn 2.1 billion (approx €289m) will be as follows:
- Heating permanent cut from 25% standard rate to 13% reduced rate
- Gas temporarily cut to 5% between April 2022 and March 2023, and then return to 13%
- Entrance prices for cultural, sports and similar events to 13%
- Basic foodstuffs (fruit, vegetables, eggs, fish, cooking oil, baby food, seeds, fertilisers and meat) cut from 13% to 5%
- Entrance fees to cultural, sport and similar events is reduced from the standard rate to the 13% reduced rate.
EU grants more VAT rate freedoms for economic crisis
In December 2021, EU finance minister agreed new reduced EU VAT rate setting freedoms which should come into place before April 2022. The European Commission is though open to earlier derogations from the existing VAT Directive restrictions on reduced rates during this temporary energy inflation spike. It has already provided permission to Spain.