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Portugal restored a tax break for food sold by restaurants from July 1, 2016, when the value-added tax rate applicable to food services fell to 13 percent, from 23 percent. A 12 percent rate applies in Madeira and a nine percent rate in Azores.
The rates only apply to food consumed on premises, with takeaway food and drinks being subject to the varying rates otherwise applicable.
The change was announced in March as part of Portugal's 2016 Budget. The rate was originally intended to fall from April 1 but the tax cut took effect from July 1.
The announcement comes despite a recommendation from the OECD that Portugal should rein in its use of reduced rates to improve the efficiency of its VAT regime. Back in 2014, the OECD proposed that Portugal should introduce a two-rate regime by phasing out its intermediate rate of 13 percent. It also proposed that it narrow the scope of its six percent rate.
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