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Government Extends Zero-Rated VAT on Essential Products Through December 2026

by THEFUTURE.TEAM

October 31, 2025

The government has announced a critical extension of the zero-rated VAT on essential items until the end of December 2026, a move designed to alleviate financial pressures on vulnerable households.

Government Policy Extension

In a decisive cabinet meeting, Finance Minister Makis Keravnos confirmed that the zero VAT rate—which was set to expire in December 2025—will now continue to apply for an additional year. The policy covers a range of essential goods, including infant formula, child and adult sanitary products, and fresh or simply chilled fruits and vegetables, ensuring that the most necessary items remain affordable.

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Economic and Social Impact

This measure is a cornerstone of the government’s broader social policies, intended to reduce household expenses and boost disposable income across the nation. Even with inflation projected to remain at zero for 2025, the extension clearly targets support for the country’s most vulnerable citizens. By reducing tax burdens on daily necessities, the initiative is poised to improve living standards and stabilize consumer spending in challenging economic times.

Ongoing Fiscal Commitments and Community Engagement

Alongside the VAT extension, Minister Keravnos reaffirmed the government’s commitment to fiscal support for local communities. Highlighting allocations of 27 million euros for 2025, an additional 15 million euros scheduled for November 2026, and another 12 million euros within 2026, the Finance Ministry is upholding its promises to the Union of Municipalities. This proactive allocation emphasizes a collaborative approach, where dialogue and trust between government agencies and local authorities are vital to sustaining effective social support programs.

Ultimately, this policy not only eases financial pressures for households but also reinforces a disciplined fiscal agenda oriented towards long-term social stability. With targeted measures and transparent strategies, the government continues to set a high standard for economic and social policy in an increasingly challenging global environment.

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US–Israel Confrontation With Iran To Trigger Significant Decline In Middle Eastern Tourism

Tensions linked to the confrontation between the United States, Israel and Iran are expected to affect tourism across the Middle East. According to estimates by Tourism Economics, international arrivals in the region could decline by between 11% and 27% by 2026. The projection, reported by Reuters, contrasts sharply with forecasts published in December that anticipated a 13% increase in arrivals this year.

Economic Implications Of Declining Visitor Numbers

Updated estimates indicate that the region could lose between 23 million and 38 million international visitors. Tourism-related spending may fall by $34 billion to $56 billion if the downturn materialises. Such figures illustrate how geopolitical instability can quickly influence travel demand and regional economic performance.

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Erosion Of Traveller Confidence Amid Heightened Uncertainty

Growing security concerns are already weighing on travel sentiment. Periods of geopolitical tension typically lead travellers to postpone or redirect trips, particularly to destinations located near active conflict zones. As uncertainty increases, tourism-dependent economies in the region may face additional pressure on revenues and investment.

Cyprus: An Alert Regional Hub

Cyprus is closely monitoring these developments due to its geographic proximity to the Middle East. Although the island is not directly involved in the conflict, regional instability can influence booking trends and traveller perceptions. Recent security incidents near the British base in Akrotiri have further highlighted how tensions in neighbouring areas can affect confidence across the wider Eastern Mediterranean tourism market.