Planned implementation of a new reduced VAT rate for certain staple foods

The Austrian federal government recently announced the reduction of VAT for certain staple foods. A new reduced VAT rate in the amount of 4.9% for certain staple foods should be implemented as of 1 July 2026 in Austria.

The following product categories are included:

• Milk, butter, yoghurt, eggs fresh from hens
• vegetables (for example, potatoes, tomatoes, onions, garlic and leek as well as other leek vegetables, cabbage, cauliflower, kohlrabi and other cabbage varieties, salad, carrots, turnips and celeriac, cucumbers, beans, peas and other pulses, pumpkin, eggplant, pepper or asparagus as well as frozen vegetables)
• fruits (apples, pears, quinces and drupes)
• rice, wheat flour and wheat semolina, noodles (without filling), bread and baked products (for example, rolls, poppy seed braided bread, salted breadstick)
• table salt

You can find the complete list here.

The reduced VAT rate in the amount of 10% is further applicable until 30 June 2026.

Comments in practice

Distinction of the applicable VAT rate

The applicable VAT rate depends on the date of service provision or the time of the import or the intra-community acquisition.

Specifications for advance payments

In principle, advance payments are to be taxed according to the legal situation at the time of the collection. If the VAT rate changes until the date of service provision, the taxation of the advance payment is to be corrected according to the legal situation at the time of the service provision. This correction takes place during the first advance registration period after the effective date of the change, which means in the preliminary VAT return for July 2026 or for the third quarter of 2026. Already issued advance payment invoices are to be corrected. Otherwise, in case of a reduction of the VAT rate, the overstated VAT may be charged due to the invoice. The issue of a final invoice is based on the legal situation at the time of the service provision.

Deviating from that, the tax authorities provide for an administrative simplification in margin note 1476 VAT Guidelines (UStR): For practical reasons, taxable persons may use the VAT rate that will apply at the time the service is provided in their advance payment invoices and pay this VAT amount to the tax authorities. However, this requires that VAT forms of the Austrian Federal Ministry of Finance (BMF) allow already for prior periods taxation at a reduced tax rate in the amount of 4.9%. In this case, an invoice correction and correction of preliminary VAT return for July is not necessary at the effective date of the tax rate change.

Technical challenges

The VAT rate change to 4.9% not only leads to changes in many ERP systems but also causes the need for technical adaptations for companies with cash register obligation. Many cash registers support only a limited number of VAT rates, and these are often limited to whole numbers. If the cash registers do not accept decimal, potentially, a software adaptation is needed in order to apply the new tax rate correctly. This means for businesses that they should contact their software provider on time and apply for a possible update. Our experts are happy to support you regarding this matter.

The effective date of the legislative amendment remains to be seen.

Authors: Alexandra Hainz, Nicole Kruckenfellner