Portugal will extend its zero rate of value-added tax (VAT) on basic food staples to the end of 2023, the country’s government has said.

The VAT rate on a list of 46 basic foods including milk, bread, rice, tomatoes and some meat and fish was dropped from six per cent to zero in April as the country, along with the rest of Europe, attempted to deal with a global cost-of-living crisis.

The rate was set to return to its typical six per cent at the end of October, but prime minister Antonio Costa of Portugal’s ruling Socialist Party announced an extension on Thursday.

He said that the scheme had yielded positive results and that the decision was made at a meeting of the Socialist Party late on Wednesday to approve the extension until 31 December.

The prime minister pointed to statistics from the country’s biggest consumer protection association, Deco, which showed that prices of the staples included in the average shopper’s basket fell by 7.94 per cent between August 2022 and April 2023.

He said: "The measure contributed to reducing prices. We want to keep controlling the price of essential food products to help Portuguese families.”

While inflation in Portugal hit a more than three decade high of 10.1 per cent in October 2022, it has significantly dropped in the months since to 3.7 per cent in August. Though inflation has dropped in the country, interest rates still remain high with Costa saying that the government plans to pass new measures later this month to support affected citizens.

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