One year after the EU passed legislation enabling member states to apply reduced VAT rates on the supply, rental and repair of bicycles, including e-bikes, Portugal has become the first country to make use of this possibility. After an amendment to the state budget was voted at the end of November, consumers will be able to buy bicycles at the lowest VAT rate of 6% starting from 1 January 2023. The savings potential is important: for the purchase of an e-bike costing €2,000 under the current standard VAT rate, consumers would save almost €300 (under the assumption that manufacturers and outlets fully pass on the reduction).

The amendment to the 2023 state budget was justified specifically with the goal that is inscribed in the Portuguese national cycling strategy of reaching a cycling modal share of 4% by 2025 and 10% by 2030. The explanatory text states: “Such an ambition, essential for the protection of the environment, the reduction of fossil fuel consumption, people's health and economy and the quality of life in and around cities, naturally requires measures that stimulate the paradigm shift from car to bicycle."

The adoption of this measure is a major advocacy success for ECF’s Portuguese member organisations, together with the country’s bicycle industry association ABIMOTA. For MUBi, it was one of six priority points for their campaign on cycling-friendly measures in the state budget, and was taken up in meetings with political parties. FPCUB also presented this demand in all meetings it had with members of the Portuguese government during the last years.

Rui Igreja from MUBi told ECF, “We are very happy that, after dozens of meetings, the Portuguese Parliament has listened to MUBi’s arguments for the reduced VAT rate on bicycles. The reduction from 23% to 6% will make pedelecs and cargo bikes in particular more accessible. These have a high potential to substitute daily car trips, but their high price tag has been an obstacle to their adoption in Portugal. The yearly cost of this measure will be lower than what the current duty reduction on road fossil fuels costs per week. Besides, unlike motorised vehicles, cycling generates significant positive externalities, namely in terms of public health, which largely outweigh the costs of the VAT reduction.”

Mário Meireles from FPCUB stated, “We are glad that one of our proposals to make cycling more accessible was adopted by the government and by the Portuguese Parliament. We are still working on multiple other proposals with the government, including a pay-per-kilometre incentive scheme for cycling, a fund for investing in road safety, a bigger budget for cycling infrastructure investments, and other measures.”

In parallel to the introduction of the reduced VAT rate, the Portuguese Parliament also approved the continuation of the incentive scheme for low-emission vehicles, including conventional, electric and cargo bikes, in 2023. This means that consumers will be able to benefit both from the reduced VAT rate and the purchase incentive. The only downturn? Funding for the incentive scheme has always been much lower than actual demand during the last years.

At the European level, the possibility to reduce VAT rates on supply, rental and repair of bicycles, including e-bikes, was opened up when the corresponding legislation entered into force in April 2022. ECF had advocated for this possibility in a joint campaign together with the Confederation of the European Bicycle Industry (CONEBI), and supported by Cycling Industries Europe (CIE). After the change in the legislation, the three organisations together supported their respective members in their national advocacy efforts, which now have borne fruit for the first time. The cycling sector now looks forward to other EU countries joining Portugal in making bicycles more accessible for citizens through VAT reductions.