Spain will include olive oil in the group of food products not subject to VAT

Olive oil in Spain will no longer pay VAT from July 1, joining the group of other food products considered essential, the Spanish government announced this Friday.

The temporary measure aims to “protect and encourage the consumption of olive oil, a healthy product whose price has recently increased, particularly due to drought,” the Treasury said.

According to official data, olive oil in Spain rose in price by 62.8% in May than a year ago, and since January 2021 has risen in price by 198.5%.

In 2023, the Spanish government has already reduced VAT (value added tax on consumption) on olive oil from 10% to 5% and was already expected to reduce it to 0% as part of the parliamentary agreement between the socialists. (in government) and the Together for Catalonia (JxCat) party signed an agreement earlier this year.

Olive oil will therefore include a group of products considered essential, such as bread, eggs, vegetables and fruit, which will be subject to zero VAT in Spain as of January 2023 in response to inflation.

Spain introduced packages of measures in response to rising prices after it had one of the highest rates in the European Union in the first half of 2022, and in July that year recorded the country’s highest inflation since 1984 (10.77%) .

During 2022, the country approved several packages of measures to respond to inflation exceeding 3% of gross domestic product (GDP), about 45 billion euros, including direct aid for consumers and companies, as well as tax breaks.

To try to respond to rising food prices, a new set of measures came into force in January 2023, including the suspension of VAT on some food and products considered essential.

Spain ended 2022 with the lowest inflation in the European Union (5.7%), and last year the figure continued to decline, despite some fluctuations, reaching 3.1% in December.

According to the latest data, in May it was 3.6%.

Spain is the largest producer of olive oil in the world and the second largest per capita consumption (after Greece). According to official estimates, production for the 2023/2024 campaign, which began last October, will again be in second place. year in a row, which is a historical low due to drought.

According to preliminary estimates by the Ministry of Agriculture at the start of the campaign, olive oil production in 2023/2024 should be limited to 765,300 tons, 15% more than the previous year, but 34% below the average of the last four years.

On the other hand, the current campaign began with stocks of 257,000 tons, which is 43% less than at the start of the previous campaign and 52% less than the average for the last four.

The 2022/2023 campaign, with less than 700,000 tons of olive oil produced, was considered the smallest in Spain in the last 20 years.

According to the Ministry of Agriculture, Spain is the world leader in olive grove area and olive oil production.

Olive oil production in Spain accounts for 70% of European Union production and 45% of world production.

More than 350 thousand farmers are engaged in the cultivation of olive groves in the country, and this sector guarantees 15 thousand jobs.

According to the same government data, olive groves in Spain cover 2.75 million hectares, with 80% of production concentrated in Andalusia, in the south of the country.