- Hans Weber
- November 29, 2023
Czech Government Proposes Lower VAT on Tap Water, Excluding Flavored Varieties
The Czech government has put forth a proposal to reduce the value-added tax (VAT) on tap water to 12%, with the condition that it remains unflavored and free from juice, syrup, or added fruit. This initiative is part of the government’s plan to consolidate public finances. However, mineral water, baby water, and coffee with milk or cream will still be subject to the standard VAT rate of 21%.
While food and dining in restaurants are subject to a reduced VAT rate of 12%, all non-alcoholic and alcoholic beverages, including draft beer, fall under the 21% tax bracket, regardless of whether they are consumed alongside food.
The proposed exception to the standard VAT rate is for tap water, which will qualify for the reduced tax rate as long as it remains unflavored. The proposal clarifies that tap water infused with other substances, such as juice, syrup, sweetener, or added fruit, will be subject to the standard tax rate. For example, an ice slush made from flavored tap water would be taxed at the standard rate.
The Ministry of Finance has agreed to include plant-based milk in the reduced VAT rate, alongside cow’s milk. However, suggestions to include baby diapers or menstrual products in the reduced rate were rejected.
The Czech Union of Commerce and Tourism has requested that mineral and baby waters also be subject to the standard VAT rate. They argue that adding decorations or garnishes to a glass or cup of tap water, such as a mint leaf, should not affect the application of the reduced tax rate.
All other non-alcoholic beverages, including tea, chocolate drinks, coffee, and plant-based milk alternatives, will continue to be subject to the standard VAT rate of 21%, regardless of the addition of tap water, milk, liquid dairy products, or plant-based milk alternatives.
The Ministry of Finance further explained that the standard VAT rate would apply to beverages such as coffee with milk (such as espresso macchiato, latte macchiato, and flat white), tea, alcoholic or non-alcoholic beer, fruit and vegetable juices, mineral water, and lemonades, including homemade versions made from tap water.
Originally, the proposal only exempted cow’s or goat’s milk from the standard VAT rate. However, the revised proposal now includes plant-based alternatives such as soy drinks, nut drinks, cereals, and seed-based options like hemp milk in the reduced VAT rate. Flavored variations of beverages, such as milk with honey or milkshakes with ice cream, will also fall under the reduced rate.
The suggestion to include menstrual products, such as tampons and pads, in the reduced VAT rate was made by government commissioner for human rights Klára Šimáčková Laurenčíková. It was argued that women from low-income groups often face challenges affording these essential products, leading to “menstrual poverty.”
In response to comments regarding the proposal, the Ministry of Finance stated that they aim to maintain the consolidation measures as agreed upon by all government parties and that the proposed measures exceed the scope of the agreed compromise. The objective of the proposed standards is to reduce the state’s budget deficit, as outlined in the introduction of the proposal addressing the comments.
Article by Prague Forum