Bars should charge lower 9% VAT for drinks

Bargoers and clubbers should see their tabs deflate by 10% as an administrative court decision corrects a VAT anomaly for bars, coffee shops, restaurants, and nightclubs.

Until recently, according to the interpretation of the VAT law offered by the previous tax commissioner, Yiannis Tsangaris, bargoers were paying 19% VAT on their drinks if they did not order food.

However, if they had ordered food with their drinks, VAT dropped to 9%.

An administrative court decision has now resolved the issue, reducing VAT due on drinks at pubs and bars to 9%.

According to the legislation, reduced VAT applies only to establishments with catering services of delivery and preparation of food and beverages, with adequate support services.

This had led authorities to wrongly, as the court ruled, to interpret the law to cover only restaurants and other food catering venues.

According to the court’s ruling, “support services also include the operation of a kitchen, waiters, preparation of orders and seating facilities for customers to consume food or drinks”.

Based on the decision, bar and nightclub owners should reduce prices by up to 10%.

However, the administrative court’s ruling does not bind businesses to tweak their price catalogue accordingly.

Following the decision, Tax Commissioner Sotiris Markides issued a circular in which he stated that a 9% VAT rate would be imposed on beverages, either alcoholic or non-alcoholic.

Any establishment capable of offering food at any time of the day will impose 9% VAT on bills – not the current 19% –, regardless of whether customers ordered food with their drinks.

Venues such as coffee shops, bars and nightclubs which do not offer food, but have support services, will also be eligible for the reduced VAT rate of 9% on beverages.

The Tax Commissioner noted that businesses offering food delivery services continue to fall under the provisions of the law, making them eligible for an even further reduced VAT rate of 5%.