Spain Set to Eliminate Value-Added Tax on Olive Oil Sales

The Spanish government has announced that olive oil will join the list of staple foods exempt from VAT, which is similar to sales tax, as part of its strategy to curb inflation amid the ongoing cost-of-living crisis.

The new measures are set to be fast-tracked into law with no objections expected from opposition parties.

Although it has remained well below the increases seen in most other European countries, recent inflation, caused by increased energy costs, global food instability and poor harvests due to sustained droughts, has significantly impacted the cost of living in Spain.

According to data released by NielsenIQ in December, the average annual household shopping basket surged by €800 between November 2022 and November 2023, with olive oil seeing some of the highest price hikes of 79 percent, 69 percent and 60 percent for extra virgin, virgin and non-virgin olive oil, respectively.

To combat this problem, the Spanish government led by Pedro Sánchez’s Spanish Socialist Workers’ Party (PSOE) introduced a raft of measures in 2023, including the elimination of VAT on staple foods such as fruit and vegetables, and a reduced rate of 5 percent on other foodstuffs such as pasta and olive oil.

The new resolution, expected to be passed into law by mid-January, will extend these measures until June 30^th while eliminating VAT on olive oil. Also added to the VAT-exemption list are pasta and seeds.

The agreement was reached after extraordinary meetings between government ministries, agencies and several prominent interest groups representing olive oil producers, farmers, supermarkets and wholesalers.

The measures apply only to retail sales to avoid facilitating increased corporate profit margins, potentially created by price rises after passing the VAT-eliminating measure. This is a matter of established policy with PSOE, which applied a similar strategy to reduce fuel costs to motorists in 2022.

The move comes just as neighboring Portugal, which eliminated VAT on olive oil and almost 50 other foodstuffs last year, failed to renew or extend its temporary relief measures, which expired January 4^th.

Food security is a high priority for Sánchez, who announced his government’s National Food Strategy during his recent presidential investiture debate.

According to Planas, the strategy will address the challenges of maintaining food production in the context of climate change and ensure food autonomy for Spain in an “interconnected world.”

Tags: Spain, olive oil