Denmark struggles on structural cut to VAT on food
The new government of Mette Frederiksen has confirmed on 2 June 2026 that VAT will be cut on essential foods.
Denmark’s Ministry of Finance had confirmed on 28 January 2026 that it will cut VAT on basic foodstuffs in 2028. But it is still debating if it should apply to all food or only fruit and vegetables. The proposals under consideration would represent a significant departure from Denmark’s long-standing policy of applying a single VAT rate across nearly all supplies.
Danish food and non-alcoholic beverage prices increased by approximately 3.2% to 3.5% annually as of January 2026.
The food VAT cut follows a temporary Swedish food VAT cut from April 2026. And an Austrian food VAT cut is coming in July 2026.
Two models for tax subsidies on basic foods
Two technical models are being discussed:
- An across-the-board reduction in the VAT rate applied to food supplies, for example lowering the current 25% rate to 20%. This approach would require amendments to Denmark’s VAT Act to introduce a reduced rate category for food, aligning Denmark more closely with other EU Member States that apply differentiated VAT rates under the EU VAT Directive.
- A more targeted zero-rate or exemption for specific food categories, most notably fruit and vegetables. From a VAT design perspective, this raises questions around product classification, scope definition, and ongoing maintenance of VAT rate mapping for mixed or processed food products. A selective zero rate would require detailed implementing guidance to avoid boundary disputes and inconsistent application across supply chains.
From an EU law perspective, both options are permissible. The VAT Directive allows Member States to apply reduced rates, including rates below 5%, to foodstuffs, provided the measures comply with neutrality and proportionality principles. However, introducing new reduced or zero rates increases compliance complexity for businesses, particularly retailers and food manufacturers operating across multiple jurisdictions.
The Danish Ministry of Finance has indicated that any VAT changes would be technically complex and unlikely to be implemented immediately, suggesting a longer legislative and systems transition period. In the interim, non-VAT measures are being considered to mitigate food price inflation.
See more in our Danish VAT guide.
