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Greece implements permanent VAT cuts for five Aegean island

Greece has permanently cut the VAT rate on five islands by 30%. The VAT reduction applies to the Aegean islands of Chios, Kos, Leros, Lesbos and Samos.

As of 1 July 2021, a permanently lowered VAT rate applies on the islands.

A reduced VAT rate on the islands has been in effect since 2018. However, the reduction was subject to renewal every six months. Following approval by Greece’s parliament, the reduction is now permanent.

Why does the VAT reduction apply?

The specified islands house infrastructure for housing refugees and undocumented migrants. Greece’s finance minister, Christos Staikouras, stated that the VAT reduction will continue as long as the islands host migrants.

However, mayors on the islands have previously expressed concern about linking the VAT reduction to specific refugee policies.

Further VAT cuts on the cards?

In order to boost the economy, Greece is looking at additional tax cuts, including reduced VAT rates.

Finance Minister Staikouras told reporters that Greece could lower VAT rate for the hospitality and tourism sectors.

Greece temporarily cut VAT on the tourism sector in 2020 to help manage the Covid downturn. The VAT rate was lowered from 9% to 5%.

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