VAT at 23% could return to Portugal’s restaurant sector
A technical think-tank which studies the benefits of tax applications has recommended that the government to put VAT on the restaurant sector back to 23%.
The Portuguese Association of of Hotels, Restaurants and Tourism (APHORT) told the online new source ECO that the “proposal is not in the State Budget for 2025, and was not suggested in the election manifestos of the various parties in the run-up to the general election in May, but would mean that prices would be hiked by restaurants if reintroduced.
Reacting to the recommendation from the Technical Unit for Evaluating Tax and Customs Policies, known as U-Tax, the President of APHORT, Inês Sá Ribeiro says it is a “hypothetical scenario” adding that an increase in VAT would “inevitably have effects on the prices charged”.
She also said that in “a scenario where purchasing power was lost, demand would be affected”.
A VAT rate of 13% (excluding alcoholic drinks) was introduced by the government of António Costa, arguing at the time that it would boost jobs in the sector.
To justify its recommendation to increase VAT from 13% to 23%, U-Tax estimates that the increase if applied to the restaurant sector would bring the government in around €1Bn, although it might “have a slight negative impact on employment” because of a “possible fall off in demand” for eating out.
“Without a concrete proposal from the government, it makes it difficult to study this seriously”, but that APHORT has “a measure and position that is already well known on VAT which is for a single 6% tax on food which does not make a distinction between the kitchen in a restaurant and a kitchen at home”.
According to U-TAX in 2024, VAT tax represented 60.1% of all taxes raised and 4.3% of Portugal’s GDP.
And a reduction in VAT in restaurants would correspond to almost 10% of all expenditure on tax exemptions and reductions in VAT, and maintaining the tax at 13% has a very limited benefit for tax payers as a whole, mainly benefitting families with higher incomes. (who can afford to eat out on a regular basis)
