Government argues reduced restaurant VAT mainly benefits wealthier consumers as budget pressures intensify in Portugal
Portugal’s government is considering reversing the reduced 13% VAT rate for restaurants and hospitality, reopening a long-running debate over tax relief for the sector.
Finance Minister Joaquim Miranda Sarmento has criticised the 2016 reduction from the standard 23% VAT rate, calling it a costly subsidy that now primarily benefits higher-income consumers. The reduced rate currently costs the Portuguese treasury an estimated €1 billion annually.
The proposal follows recent comments from the International Monetary Fund, which questioned whether lower VAT rates on hospitality remain economically justified as Portugal’s tourism and restaurant sectors continue to expand strongly.
Any increase would require parliamentary approval, and the government does not yet appear to have enough votes to guarantee passage.
Read more in our Portugal VAT guide.
Europe dusts down VAT cuts with Gulf conflict
If approved, the move would mark another example of European governments reconsidering temporary or politically popular VAT reductions introduced during periods of economic support. For hospitality businesses, the debate also highlights the growing volatility of reduced VAT rates as governments search for additional revenues amid rising public spending pressures.
