Austria Introduces Reduced VAT for Essential Food Items Starting July 2026

The Austrian government has unveiled a new value-added tax (VAT) rate aimed at basic food staples, set to take effect from July 2026. Deputy Chancellor Andreas Babler announced that a select group of essential food products will be subject to a significantly reduced VAT rate of 4.9 percent, which is less than half the previous rate applied to most other food items.

The revised VAT applies to a wide range of staple foods including bread, milk, butter, eggs, rice, onions, garlic, various salads, cucumbers, tomatoes, potatoes, apples, pears, and stone fruits such as apricots. The initiative is designed to prioritize products that are produced domestically within Austria, supporting both local agriculture and household budgets.

The Ministry of Finance has compiled a comprehensive list of eligible items, focusing primarily on goods that form the basis of everyday nutrition and are predominantly sourced from Austrian producers. The measure is expected to deliver savings to consumers, with a typical family of four projected to save approximately 100 euros annually under the new scheme.

The government has allocated around 400 million euros per year to fund this VAT reduction initiative. For the remainder of 2026, the expected fiscal impact is estimated at about 200 million euros. This cost is set to be offset through newly introduced levies, including a communal plastic tax targeting non-recyclable plastics and an additional package tax on goods imported from non-EU countries, which aims to support traditional retail businesses.

To ensure that the benefits of the VAT reduction are passed on to consumers, the Federal Competition Authority has been granted oversight powers. This provision allows the authority to intervene if retailers fail to transfer the reduced tax savings to shoppers through lower prices.

Within the broader context of government policy, the Deputy Chancellor reaffirmed commitments to comprehensive healthcare reforms. These include a detailed analysis of the country's healthcare provision, aimed at addressing the decline in publicly insured physicians and reversing the increasing trend towards private medical practitioners. The analysis is expected to inform future policy decisions and improve healthcare structure and accessibility.

On matters of national defense, the government is awaiting the findings of a commission tasked with reviewing military and civil service obligations, including potential recommendations to extend mandatory military service. However, any such proposal would undergo extensive parliamentary deliberation and is not currently included in the government's program.

In relation to European and international trade, the government emphasized the need for a more assertive European stance, particularly in response to recent developments in U.S. trade policy. Austrian leaders advocated for strategic measures to protect European interests, especially in the agricultural sector, should further tariffs be introduced by the United States.

The administration also highlighted plans to reform media funding. An independent analysis of the current media support framework has been commissioned to ensure future funding is effectively targeted at supporting quality journalism. There is an expressed commitment to maintaining a broad and diverse cultural landscape, with particular attention to supporting smaller cultural initiatives across the country.

Overall, the introduction of the reduced VAT rate for essential foods represents a key policy move to help households manage living costs, strengthen domestic agriculture, and support the broader economy amid ongoing fiscal and social reforms.