The Latvian competition authority (KP) has launched an evaluation of a pilot project concerning the application of a reduced VAT rate of 12% on essential food items such as milk, bread, eggs, and poultry. This project, which began on May 28, 2026, aims to determine if food retailers have transferred the price reduction resulting from the VAT decrease entirely to consumers.

To effectively utilize the data available to KP and reduce the burden of information requests on food retailers, the evaluation will use price data obtained through a Memorandum on Food Trade. The KP compared food prices from major retailers, including SIA “RIMI LATVIA” and “MAXIMA Latvija” on June 30 and July 1, 2026, and analyzed prices at Lidl Latvija SIA stores on June 7 and July 1, 2026, considering Lidl's marketing campaign that preemptively reduced prices by 7.4%.

Initial findings from KP indicate that the three largest food retail chains in Latvia have largely passed on the planned price reduction effect of 7.4% to consumers. However, KP identified some instances where retailers did not fully implement the price decrease. Consequently, KP requested explanations from retailers regarding specific food products that did not meet the expected price reduction by July 1, 2026.

Retailers attributed these discrepancies mainly to technical or human errors, product unavailability, or peculiarities in data representation. They have since made necessary adjustments to prices and VAT rates to ensure compliance.

In cases where the price reduction differed from the planned 7.4%, KP noted that these differences did not exceed one cent and were related to rounding results in accordance with accounting and VAT laws, thus not considered significant.

Overall, the average price reduction resulting from the VAT pilot project across affected food groups is 8.32%, surpassing the previously set minimum reduction of 7.4%. The largest average price reduction is observed in the dairy product category at 8.58%, followed by poultry at 8.28%, bread at 8.26%, and eggs at 8.14%.

KP will continue monitoring the impact of the reduced VAT rate and food pricing until the end of 2026, assessing the transfer of the VAT reduction and the dynamics of food retail markups, including differences between imported and locally produced products. A final market monitoring report is expected to be published in January 2027.