From 1 January 2026 the established system of reduced VAT rates will expand to include islands in the North Aegean Region the Samothraki area of the Evros unit and Dodecanese islands with populations up to 20 000 according to ELSTAT data. A new circular from AADE sets out how the 30 percent VAT reduction will apply to goods and services that meet the conditions of Article 26 of the VAT Code. Authorities note that the same reduced rate framework will continue to apply to Lesvos Kos Samos and Chios.
The measure excludes tobacco products and means of transport while the reductions convert existing VAT rates of 24 percent 13 percent 6 percent and 4 percent to 17 percent 9 percent 4 percent and 3 percent respectively. The policy applies strictly to 19 islands with fewer than 20 000 residents and to several smaller islets. The islands qualifying for the new regime include Agathonisi Agios Efstratios Astypalaia Ikaria Kalymnos Karpathos Kasos Kos Lipsi Leros Lesvos Limnos Megisti Nisyros Oinousses Patmos Samothraki Samos Symi Tilos Fournoi Chalki Chios Psara and many nearby islets.
The circular provides extensive guidance on how the reduced VAT rates apply to sales of goods from the islands deliveries from mainland Greece services carried out physically on qualifying islands and imports processed on these territories. Clear criteria define each category and a series of practical examples explains when the reduced rate applies.
Sales of Goods From Islands With Reduced VAT
For goods sold from a qualifying island the products must be physically located on that island at the moment the tax obligation arises. Transactions must also be carried out by a business established on the island regardless of where the buyer is located.
One example involves a Chios resident supplying packaged pasta to buyers in Athens Leros and other regions with all transactions receiving the 30 percent VAT reduction. Another case shows an Athens based business operating a permanent branch in Lesvos selling packaged olives to various destinations with all deliveries qualifying for the reduced rate. A contrasting example demonstrates that no reduction applies if goods are sold through a mainland branch of a business whose headquarters are on a qualifying island.
The circular also explains rules for commission based sales including cases where the commissioner is island based and the agent operates from mainland Greece.
Deliveries of Goods From Mainland Greece to Qualifying Islands
For mainland to island deliveries the reduced VAT applies when goods are delivered to a business with a permanent establishment on one of the qualifying islands. Buyers based elsewhere but operating a branch on a qualifying island also benefit when the purchase is destined for that specific branch. Public entities such as municipal services and other non taxable legal persons on these islands likewise qualify.
Businesses must ensure that purchased goods relate to their professional activity on the island and sellers are responsible for verifying that goods are indeed destined for a qualifying location. Proof of transport is required when a buyer arranges their own shipment.
Illustrative examples include footwear shipped from Patras to businesses in Kos and Chios which qualify for the reduced rate while a refrigerator sold to a private consumer in Kalymnos does not. Another scenario shows that a business in Athens selling clothing to a Rhodes based company but shipping the goods to its Samos and Chios branches must apply the 30 percent reduction for those branch deliveries.
Services Performed Physically on Qualifying Islands
Services provided by businesses established on qualifying islands receive the reduced VAT rate only when performed physically on those islands. Services executed by businesses not established on qualifying islands do not qualify even if the work takes place on a reduced rate island. Likewise services from island based professionals carried out elsewhere are taxed normally.
For example an engineer based in Karpathos supervising construction in Kalymnos benefits from the reduced VAT since both islands are included while an engineer based in Rhodes supervising work in Karpathos does not. Another case shows that services from a Karpathos engineer performed in Rhodes do not meet the criteria for reduced VAT.
Imports Into Qualifying Islands
Imports processed at customs offices on qualifying islands are eligible for the reduced VAT provided the importer resides or operates a business on that island. Customs officials verify business documentation for professionals and require proof of permanent residence for private individuals.
Examples include an electrician in Chios importing appliances from Japan and a Lesvos resident importing a bicycle from China with both transactions receiving the reduction because customs procedures occur on their home islands. A final example notes that an import processed in Piraeus by a resident of Kalymnos does not qualify because the customs clearance did not take place on a qualifying island.
The circular adds that if a higher VAT rate is mistakenly applied businesses can issue a credit invoice solely to correct the VAT amount.
