Government Removes Olive Oil VAT To Boost Sales

Spain is attempting to come to the aid of its beleaguered olive oil industry by removing all VAT on the product in an effort to boost domestic sales.

The move was approved by the Spanish Cabinet last week and came into force yesterday,1st July.

The move which followed a cut last year from 10% to 5% was announced by Luis Planas, Spain’s Minister of Agriculture, Fisheries and Food, as he revealed the country’s 2023 Food Consumption Report.

The rise in olive oil prices has been inexorable with an average increase of 272% since September 2020, according to the country’s agriculture ministry.
The price increase has been put down to several years of severe drought in the southern Andalucia region, as well as supply chain inflation. While prices have come down from last year’s peak they are still close to an all-time high.

Andalucia is the largest olive oil-producing area in Spain, which produces around 50% of the world’s olive oil.

According to the International Olive Oil Council (IOC)’s weekly pricing statistics for May, refined oil prices in the Jaén area stood at €660 ($716) per 100kg, 37.2% higher than the same period in the previous crop year. Extra-virgin olive oil was up 36.1% to €710 per 100kg.

In the supermarket the price of one litre of non-branded extra virgin olive oil has risen three-fold with an average of €3.45 in February 2021, to €9.46, according to the Spanish broadcaster RTVE.

It would see olive oil included in a group of basic necessities that apply the ‘super-reduced’ rate permanently, such as bread, fruit and vegetables and eggs.

The elimination of the 5% VAT rate is likely to have a modest effect at the chek out reducing the price by around €0.50 per litre.

Spaniards use olive oil to cook and to garnish salads, vegetables and other dishes. Last year Spanish households consumed on average 6 litres of olive oil per person, compared to 0.4 litres for international consumers, according to the agriculture ministry. But the rise in prices has made some switch to cheaper cooking oils.

In a message posted on social media site X, Planas said the move “protects and encourages the consumption of this healthy food, a hallmark of the Mediterranean diet and the spearhead of the Spanish agri-food sector.”



Share The Madrid Metropolitan: The only Madrid English language newspaper