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Greece and lenders agree to exempt 5 Aegean islands from VAT increase as of 1.1.2018

Five islands in the Eastern Aegean Sea will be exempted from the increase of the Value Added Tax that will go into effect as of 1.1.2018. The V.A.T. will remain at the same levels for the islands of  Lesvos, Chios, Samos, Kos and Leros as they have received the main burden of refugee flows.
The Greek Finance Ministry announced on Tuesday, that they have reached an agreement with the country’s lenders, “the institutions” that the above mentioned islands will be exempted  from the VAT increase, “recognizing the particular problems the five islands face as they are receiving the main burden of refugee flows.”
The exemption will be valid only until 31. June 2018.

For the rest of the 27 islands, the V.A.T. rates will increase as of 31.12.2017.
The rates will increase:
  • from 5% to 6%
  • from 9% to 13%
  • from 17% to 24%
The VAT increase should have been implemented already by end of 2016.
KTG understands that the Finance Ministry will distribute a so-called “transport compensation”, a state-subsidized compensation that will be given according to income and social criteria by the end of the year to these islands.
The Ministry has decided also to apply the measure of “transport equivalent” on the islands of Greece as of the second half of 2018, the statement said.

The transport equivalent will harmonize the cost of moving passengers and goods to and from the islands in relation to the cost of inland transport. To that end, objective indicators such as the cost of land transport per kilometer will be taken into account, which will help to offset the disproportionate cost of shipping, in relation to land transport.”

This measure will be funded by the Public Investment Program.

It should be noted that due to increased transportation cost for goods the Greek islands had been enjoying low VAT rates, decreased by 30%, for many years. But Greece;s lenders have put pressure for scrapping this and VAT started to gradually increase in the last 2-3 years.
The islands that will see V.A.T. increase as of 1.1.2018 are:
Agathonisi, Agios Efstratios, Alymia, Arkies, Astypalea, Giali, Ikaria, Kalymnos, Kasos, Kastelorizo, Kos, Lefthos, Lipsi, Lemnos, Marathos, Nimos, Nisyros, Oinousses, Patmos, Samothraki, Saria, Strongyli, Symi, Syrna, Telendos, Tilos, Pharmakonisi, Fournoi, Chalki, Psara, Pserimos.

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