VAT blow for all remote islands

VAT blow for all remote islands

As of January 1, the last batch of Aegean islands will lose the special 30 percent discount on value-added tax rates that they have enjoyed up until now and see VAT rates revert to those that apply in the rest of the country. The tax break was originally introduced to offset increased transportation costs and prevent their dwindling permanent populations from deserting them altogether.

After Santorini, Myconos, Naxos, Paros, Rhodes and Skiathos as of October 2015, and Syros, Thasos, Andros, Tinos, Karpathos, Milos, Skyros, Alonnisos, Kea, Antiparos and Sifnos from June 2016, all other Aegean islands will lose the discount in two-and-a-half months’ time, including the islands that have received the lion’s share of refugees trying to reach Western Europe: Lesvos, Chios, Samos and Kos.

According to Finance Ministry data, the abolition of the reduced VAT rates on many Aegean islands, combined with the increase in the top bracket’s rate from 23 to 24 percent as of June 1, has resulted in a significant increase in takings. On most islands – particularly popular holiday destinations – VAT revenues have posted major growth compared to last year, exceeding the targets set by the government. The available data show that the biggest rises were recorded at tourism hot spots Myconos and Rhodes.

Meanwhile, the Finance Ministry is about to complete the process of exempting businesses with annual gross revenues that do not exceed 25,000 euros from having to pay VAT. This will raise the threshold from the current level of 10,000 euros per annum.

Enterprises that choose to be exempt from VAT will not add the tax charge to their customers’ bills for goods or services, and will not be entitled to VAT rebates. New companies will by default have normal VAT status, but will be able to choose whether they wish to be exempt from VAT after their first year of operation, providing their revenues have not exceeded the limit.

Ministry officials say that raising the exemption threshold will bring administrative costs down both for the tax authorities and small enterprises.

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