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Portugal further duty cuts ahead of VAT reduction on petrol and diesel to 13%

12% energy inflation and risks from Ukraine war prompts duty cut whilst 10% VAT cut pending

Portugal is the latest country to propose a Value Added Tax rate cut on petrol and diesel.  Whilst it is waiting on European Commission confirmation, it announced 7 April 2022 that it will cut duty on petrol by an amount equivalent to a 10% reduction in VAT.

Portuguese inflation hit a 30-year high in March 2022 at 5.7%.

Portugal is seeking a reduction from the standard rate of 23% to the reduced VAT rate of 13%. Portugal is already providing refunds to consumers on the special ISP duty on petrol and diesel.

A number of other EU states cutting VAT on basics and fuel.

The government has request permission from the European Commission for the cut given the VAT rate rules are governed by the EU VAT Directive. This does not generally allow petrol to be subject to a reduced or nil VAT rate.  It does however give scope for emergency rate cuts at times of economic crisis.

Any rate cut would still require ratification from the Parliament.  This presents a challenge since due to an inconclusive election result last year leaving the Parliament partially operational. On 6th April 2022, EU states ratified new reduced EU VAT rate setting freedoms

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