Austria to Cut VAT on Essential Food from July 2026

Austria will halve VAT on selected essential food products from 10% to 5% starting 1 July 2026, aiming to ease household living costs and deliver immediate savings at the checkout amid persistent food price pressures. The measure, confirmed on 14 January 2026, is part of a broader anti-inflation strategy and will be partly funded through new taxes on non-recyclable plastics and fees on non-EU parcels, with details on eligible products to follow.

Austria plans to halve VAT on essential food products to help households cope with high living costs.

From July 1, 2026, VAT on a selected group of staple foods will be reduced from 10% to 5%. This is intended to lower everyday grocery bills and ease pressure on consumers.

The decision was confirmed on January 14, 2026, reflecting ongoing concern about inflation. Although inflation in Austria has started to slow, food prices remain a major burden for households.

To help finance the VAT cut, the government plans to introduce a tax on non-recyclable plastic from October 2026. Austria also plans to introduce fees on parcels imported from non-EU countries, such as China.

Similar food VAT reductions have recently been announced in Sweden and Denmark.

The Austrian government says rising prices for basic goods are directly affecting households. Lowering VAT on a “selected shopping basket” of essential food is meant to deliver immediate and visible savings at the checkout.

The VAT cut is also part of a wider strategy to reduce inflation to around 2%, compared with current higher levels. Officials have warned that prolonged inflation harms consumer confidence, domestic retail, and Austria’s overall economic competitiveness.

The government has not yet published the exact list of food products that will qualify for the 5% VAT rate. Further details are expected closer to the start date.

This clarification will be important for retailers, suppliers, and VAT systems, as correct product classification will determine which sales benefit from the reduced rate.