The Government of Spain has cut its VAT on staple foods such as bread and milk in order to alleviate the rising cost of agri-food products.

Spanish president Pedro Sánchez announced that VAT on all staple foods will be reduced from 4% to 0% and from 10% to 5% for olive and seed oils and pasta.

The VAT reductions are part of a new €10bn aid package, bringing the Spanish government’s total investment to combat the rising cost of living to €45bn. The additional €10bn in aid also includes energy and fuel supports set to benefit consumers.

"As we did with energy and fuel subsidies, the Government is going to ensure that VAT reductions and aid to farmers are directly and immediately passed on in food prices,” President Sánchez said.

Input costs

The Spanish president has also announced that direct aid worth €660m will be provided for farmers to offset the rising costs of fertiliser and agricultural and fishing diesel.

While some of this finance will be provided to farmers through tax cuts, president Sánchez’s government has also launched another drive for grant applications for farmers.

Farmers can apply to receive a grant, a loan or a combination of both and certain types of farm companies will be required to apply for a minimum loan amount.

The interest rate of the loans will be 0% and they will be granted with a repayment period of 10 years with a 3-year grace period.

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