The existing reduced 9% VAT rate for the catering sector will remain in place in Lithuania until the end of 2023, the parliament Seimas decided on November 22.
Lower VAT rates were introduced to prop up the catering sector during the Covid-19 pandemic and were due to expire at the end of the year. Previously, the government proposed to extend the measure until July next year.
Lithuanian MPs adopted the amendments to the Law on Value-Added Tax, proposed by the Freedom Party, with 94 votes in favour, 10 against and 27 abstentions.
The reduced VAT rate will apply to sports events, clubs and performers until July next year.
The 9% VAT rate will also apply indefinitely to accommodation, arts and cultural establishments and events, e-books and periodicals, while the 5% VAT rate will apply to state-compensated special medical foods.
The regular VAT rate in Lithuania is 21%.
According to the Foreign Minister Gabrielius Landsbergis, the extra 65 million euros in budget spending on the reduced VAT is a “significant amount” of money that could have been used for other needs.
“I am disappointed that our coalition partners have not heard our arguments. We thought that a consensus had been found,” Landsbergis told reporters after the vote.
“We are going to sit down and discuss the next political steps. “It seems to me that today a certain Rubicon has been crossed,” he added.
The Homeland Union’s leader said that the decision had undermined trust between the coalition partners. However, he sees no threat of the ruling coalition collapsing.
“I believe that solutions will be found for how we should go on working together. We can continue to do things. But today there was a significant breach of trust in the coalition,” Lansbergis said.
Last month, the Homeland Union’s presidium instructed the ruling party’s MPs not to submit or support 2023 budget initiatives unless they had been coordinated with the government.
Prime Minister Ingrida Simonyte suggested that the reduced 9% VAT rate for art and cultural events and e-books should be made permanent, but that for food serving businesses, performers, as well as sporting events and gyms should only be extended until July 2023.
The ruling coalition in the Lithuanian parliament consists of the Homeland Union, Freedom Party and Liberals’ Movement. (LRT/Business World Magazine)
