Austrian VAT Rate Changes 2026

VAT Rate Changes 2026

Austrian VAT Rate Essential Foodstuffs by July 2026

The government has confirmed their intention to reduce the VAT rate on a defined basket of essential food items from 10% to 5%, with effect from 1 July 2026.

This announcement forms part of a broader economic and social policy package presented under the government’s 2026 agenda, aimed at addressing inflationary pressures and easing the cost-of-living burden on households.

While the measure has been publicly confirmed at government level, it has not yet been formally enacted through legislative amendments to the Austrian VAT Act (Umsatzsteuergesetz). The reduction is expected to be implemented through future legislative changes, which will be published in due course in the Austrian Official Gazette and the federal legal information system (RIS).

You can find here the official announcement.

Austrian VAT Cuts by January 2026

As part of its 2025–2029 Fiscal Structural Plan, the Austrian Government has confirmed the introduction of a VAT exemption for feminine hygiene products and contraceptives, within a broader package of measures in the areas of health and social affairs. According to the published plan, the exemption will enter into force on 1 January 2026.

The VAT exemption will apply to feminine hygiene products and contraceptives, with the aim of reducing the tax burden on essential goods and improving access to reproductive health. While both the introduction of the exemption and its effective date have been confirmed, further implementing legislation will be required to define the exact list of products covered, as well as the operational and invoicing requirements applicable to businesses.

From 1 January 2026, businesses operating in Austria and supplying these products will need to adapt their VAT processes accordingly. This includes the correct application of the VAT-exempt rate, updates to invoicing and ERP systems, and accurate VAT reporting in periodic VAT returns. These changes will be particularly relevant for eCommerce sellers, international distributors and multinational groups with VAT obligations in Austria.

VAT manual

The VAT exemption forms part of the Budget Accompanying Act 2025 (Budgetbegleitgesetz 2025), which was officially published in the Austrian Official Gazette on 30June 2025 (BGBl. I 25/2025). Take a look at the official legislative document.

VAT Rate Changes 2018

Accommodation services were previously taxed at 13%, which is a second reduced rate in Austria. The standard Austrian VAT rate is 20%.

These changes are important for all companies currently automating their VAT recovery of employee expenses. Their system must be updated to make sure it reflects the updated VAT rate.

Most European countries apply a reduced rate on accommodation services. Only Denmark, Slovakia and United Kingdom apply the standard VAT rate on these services. There is a long-standing debate about the applicable VAT rate on accommodation services. Reducing rates improves unemployment rates because tourism is a labour-intensive industry, however, several scholars point out that this is only a temporary measure that would not work in the long-term.