Portugal considers restaurant VAT cut in 2014

There has been some progress last week on discussions to reduce Portuguese restaurant VAT from 23% to 13% as the political parties discuss next year's budget.

Portugal is keen to emulate Greece's restaurant VAT cut to 13% in August, and this month's confirmation that Ireland with retain a 9% VAT for entertainment.  It has seen a 25% drop in the catering industry in the past four years, linked to VAT attracting the higher charge of the standard rate.  Ireland claims that its ongoing VAT subsidy has created over 2,000 jobs.

The VAT subsidy would come into effect in July 2014, if approved.  This would likely need approval from the bail-out partners - the IMF, ECB and EC.  They will undergo another major review of Portugal's progress towards exiting emergency bail-out mechanism in the summer of 2014.

Attempt to have the VAT rate reduced this summer, or in the winter, have been blocked by the ruling party of the premier, Pedro Passos Coelho.