Cyprus implements zero VAT on essential goods to combat inflation

The Cypriot government has introduced a series of measures to combat high inflation, primarily through the expansion of zero VAT on a wide range of essential household goods. This policy, part of a €70 million relief package, aims to alleviate the financial burden on consumers as the cost of living continues to rise.

Effective October 1, 2026, the zero-VAT rate applies to various types of fresh and frozen meats, including beef, pork, poultry, and rabbit. Starting October 12, 2026, the scope of the measure expands to include bread, milk, dairy products, baby food, coffee, sugar, diapers, and feminine hygiene products, remaining in effect until May 31, 2027. Some categories will see this benefit extended through the entirety of 2027.

Industry representatives, including Marios Antoniou of the Pancyprian Retail Association and Andreas Hadjiadamou of the Supermarket Association, have welcomed the government initiative. They noted that while the reduction provides immediate relief, the total savings depend on the original tax rate of the specific product. Retailers are currently adjusting their systems to comply with the new tax regulations as they await final clarification from the Tax Department regarding the full scope of qualifying items.