According to OCU, the reduction of VAT on olive oil to 0% means a saving of between 35 and 75 cents per liter

As approved by the Council of Ministers, it entered into force this Monday the exemption of Value added tax (VAT) on olive oilThis implies a savings of between 35 and 75 cents per litre, depending on the type of oil, according to the Consumer Protection Organization (OCU).

The measure is useful, but fail“, said the OCU’s spokesperson for Communications and Institutional Relations, Enrique García, although he acknowledged that this will “mitigate” the effect that the price increase has had on the consumption of this food, which has fallen by around 20%. The ministry even stated that the aim of this measure is “to protect and promote the consumption of olive oil, a healthy product whose price has become more expensive in recent times due to, among other things, the drought.”

The OCU spokesperson also regretted that this measure had not been extended to other products such as meat and fish, which in his opinion had become ‘luxury foods’ due to inflation.

The consumer organization for its part Façade has considered that the consequences of the VAT reduction on oil will be “extremely mild” for the consumer. The spokesperson, Rubén Sánchez, emphasized that the price of oil at origin has increased by 2 euros per liter since January 2023, while this increase at the points of sale amounts to 7 euros. The reduction of “a few cents does not mean the product is cheap,” he added. That is why it has been called upon a solution that entails “intermediate profit margins”..

With the VAT exemption, olive oil has been added other essential products that also have 0% taxsuch as milk, bread, flour, eggs, cheese, fruit, legumes, cereals and vegetables. In the same way, the 5% VAT reduction on pasta and oils (except olive oil) is maintained.

In any case, VAT on these products will gradually increase in the coming months. From October 1, products with 0% VAT will have 2% VAT until the end of the year, after which they will return to the usual rate of 4%. Oils and pastes are taxed at a VAT rate of 7.5% from October to December, which returns to 10% in January.

The reduction or exemption from VAT on basic foodstuffs is an exceptional measure that started on January 1, 2023, as a response by the central government to the high inflation that families faced in their shopping baskets due to several factors, such as war in Ukraine or the drought that ravaged the country. Since then, extensions have been approved every six months and the novelty in the latter is the abolition of the tax on olive oil.

10% VAT on the electricity bill

In addition, the average electricity price on the wholesale market in June will lead to a reduction in VAT on the next bill, which will again drop to 10%.

This will be possible because the Spanish government has set this reduced rate for the whole year, although it has made an exception: when the average of the ‘pool’ was not higher than the 45 euros/MWhthe tax would increase to 21% the following year for all consumers, both free market consumers and regulated market consumers.

Of course, the seriously vulnerable are spared from this, they are kept at 10%.

The exception provided by the executive branch is exactly what happened March, April, May and Junewhich followed months in which the MWh fell below the 45 euro threshold.

The general market consensus is that the average electricity price will continue to rise in the coming months. Futures are on the rise, trading at 75.9 euros/MWh for July and 78.4 euros for the third quarter, although they will fall to 67.7 euros by 2025, according to information from the operator OMIP.