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From the first of September another increase in the VAT rate from 13% (low) to 23% (standard) will be introduced in three versions for the tourist sector and in two versions for commercial sites (eg, taverns, supermarkets). This is stated in the explanatory circular letter issued by the Secretary General of the Treasury Yannis Kapeleris, and which provides, in particular:

1. Food generally is taxed at the standard rate of VAT (23%). This provision applies also to the catering services offered by hospitality companies and other shelters, whose accommodation services will be taxed from January 1, 2011 at a reduced rate of 6.5%. In order to avoid substantial interference with the hotel sector, which contributes significantly to the development of tourism, and given the fact that tourist packages are negotiated in advance, if the hospitality companies offer accomodation and catering or other services for a total price, provided that the separation of the two rates is not possible, this separation of tax rates from 1 September 2011 will be done in the following manner:

a. Bed and breakfast: 5% of the total amount will be taxed at the standard VAT rate of 23% because of the breakfast offered.

b. Accommodation with half board: 15% of the total price is subject to taxation at standard VAT rate of 23% because of the breakfast and lunch offered.

c. Accomodation of the type all inclusive (full board, inclusive of consumption of beverages and providing other services included in the package, such as telephone service, using umbrellas, sports services, etc..): 30% of the total price is subject to taxation at standard VAT rate of 23% for the food, the consumption of alcoholic beverages and other services included in the tourist package.

2. A company that trades with various commodities and offers various services, regardless of the code of the activities which is related to its core activity, is required to apply separate VAT rate that applies to the specific goods or specific services. For example (a) a company that has a grocery store and a tavern, will be taxed for the standardized food offered at the grocery store at the reduced rate, while for the tavern will be applied the standard rate of 23%, (b) a supermarket, that has a department for the sale of prepared meals will be taxed for the goods from supermarket at the appropriate rate (reduced - 13% for standardized food) and the standard rate of 23% will be applied for the sale of prepared meals.

3. Standardized food continue to be taxed at a reduced rate (13%), although they are ready for direct consumption.

Standardized food are considered to be those which are produced for vast consumption and are provide for sale packed or are sold in large containers or quantities and sold in bulk form or divided into smaller quantities.

This case relates to products supplied at points of sale packaged, eg. canned sausages, yoghurts, prepared salads (caviar, Russian salad, etc..) as well as food that are in large containers or large quantities and sold in bulk form or divided into small quantities, eg. sausages, cheeses, olives, pickles, and others of the kind. It is noted that placing the sandwiches in a plastic or other packaging does not make them standardized food, and therefore they are taxed at the standard VAT rate of 23%.

At a reduced rate of VAT (13%) continue to be taxed uncooked foods (pasta, legumes, fruits, vegetables and other food products, fresh or frozen) as well as prepared foods that are sold frozen, regardless of the number of business of the company.

4. The sale of bread continues to be taxed at a reduced VAT rate of (13%). At the same rate continue to be taxed also ordinary bakery products such as rusks, sticks, bagels, croissants, biscuits and cakes.

5. Mineral still water continues to be taxed at a reduced rate (13%).

6. VAT rate applied does not depend on whether goods are sold retail or wholesale.