Confusion as new restaurant IVA (VAT) regime just two weeks away

Just two weeks from the (re)introduction of 13% VAT on certain items in restaurants, businesses are said to be confused and apprehensive.

The problem is that while IVA used to be 13% across the board (increased to 23% under the last government), the new reductions are much less clear.

For example, a typical café menu with main course, drink and coffee involves IVA at 13% for the first and last items, but a levy of 23% for a soft or alcoholic drink.

Mathematical tables drawn up by the tax department now have to be factored in to restaurant software, and the whole process is leaving many scratching their heads.

National tabloid Correio da Manhã claims meetings between the government and AHRESP (the association representing the restaurant sector) are unlikely to come to any conclusion until next week.

But economy minister Manuel Caldeira Cabral is gung-ho about the plan, saying it will bring a “mixture of benefits for the consumer” and may even lead to lower prices.

AHRESP has already advised its members against lowering prices, particularly as many have almost lost their livelihoods due to the hike to 23% four years ago.

As prime minister António Costa explained when the government pledged to reduce IVA levels for restaurants, the idea is more geared towards boosting employment than encouraging eateries to lower their prices.

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