Minister opposes reduced rate VAT for catering sector

Catering sector companies of the Baltic States plan to hold a strike at the end of October due to what they believe to be excessive value added tax (VAT). Minister of Finance of Lithuania Gintarė Skaistė however does not think that reduced rate VAT for cafés and restaurants would be the right solution.

The finance minister told the media Wednesday that VAT exemptions have little social effect as they often benefit people with greater income who purchase more.

According to her, practice also proves that reduced rate VAT for catering companies does not lead to lower prices for consumers.

President of the Lithuanian Hotel and Restaurant Association (LVRA) Evalda Šiškauskienė said in July that restaurants would go on strike due to tax burden as reduced rate VAT was eliminated for them while the minimum monthly salary rose by around 70% in several years. She added that 21% VAT in the catering sector is among the highest in the euro area.

Lithuanian restaurants had already protested in April 2024 demanding for the VAT exemptions.

Reduced rate VAT of 9% for restaurants, cafés and similar catering companies was eliminated on 1 January 2024.

The Ministry of Finance estimated that the standard rate VAT for catering companies would bring additional EUR 140 million to the state and municipal budgets.