Zero VAT in Cyprus, but Prices Rising? Consumers Question the Reductions

Zero VAT in Cyprus was supposed to lower the prices of basic products, but a consumer organization points to increases before the relief was introduced and incomplete reductions after it was launched. The Cyprus Consumers' Association questioned the state agency's assessment that the measure had been implemented to a very large extent.

The dispute centers on how much of the tax relief actually reaches buyers. The association emphasizes that a price increase alone doesn't prove a violation of the law. Its findings apply to a sample of products and stores, not the entire Cypriot market.

Zero VAT in Cyprus under the microscope of consumers

In a press release dated October 18, the organization presented the results of price monitoring from September 30, the day the additional protective measures were announced, to October 17.

The extension of zero VAT to five additional product categories has come into effect October 12, 2026. This covers the types of bread, milk, coffee, sugar, and baby food specified in the regulations. The solution is intended for May 31, 2027.

According to the association, even before the change came into effect, average prices for the eight products monitored increased by 1-7 cents. After the relief was implemented, prices did not fall everywhere to the expected level.

The Office presents a different assessment

In a statement dated October 15, the Office of Consumer Protection assessed that the reduction had been implemented to a very large extent. It reported price drops for the vast majority of selected products subject to inspection.

The Office also emphasized that the study is random in nature. It covers specific goods and its results should not be applied to the entire supermarket range.

The inspections are based on both prices recorded directly in stores and data from the e-kalathi platform. The office announced further monitoring and reminded that prices also depend on the costs of supplies, raw materials, transportation, and competition.

The reservations concern four out of ten supermarkets

The association also analyzed a table published by the office. According to its assessment, four of the ten supermarkets included failed to fully pass on the benefits to customers.

The organization also identified three products whose average prices increased after the discount began. In two supermarkets, it noted no price reductions for monitored bakery products.

The association's broader monitoring used data on 49 supermarkets present in e-kalathi and information from the private Smart kalathi app. Therefore, it is not the same sample as the ten stores from the office's table.

The abolition of 5% VAT means a price reduction of approximately 4.76%

The discussion includes an expectation of a 5 percent price reduction. This requires clarification: the tax rate and the percentage change in the gross price are different.

If the product cost 10.50 euros, including 5% VAT, its net price was 10 euroAfter applying the zero rate, with the net price remaining unchanged, it would cost exactly 10 euros.

So the saving is 50 cents, or approximately 4.76% of the previous gross priceThis is a mathematical calculation, not the result of a store inspection.

The difference between the recorded discount and this level alone is not sufficient to determine irregularity. The starting price, promotions, and any changes in the net price must also be taken into account.

How to check if purchases have actually become cheaper?

For households, the final price at checkout is paramount. When comparing offers, it's worth checking for the same product, package size, and price per kilogram or liter. It's also helpful to keep previous receipts.

The consumer organization is demanding more effective oversight and action to ensure that the benefits of the relief reach residents. Its allegations concern the effectiveness of the solution and market assessments; they do not constitute a conclusion that the indicated stores broke the law.