Latvia 12% VAT on essential food Jul 2026 to Jun 2027 to combat inflation effects
Latvia’s has introduced a temporary reduction in value-added tax (VAT) on basic food items in an effort to ease pressure on households struggling with stubborn inflation. The measure came into place for 12 months between 1 July 2026 and 30 June 2027.
From 1 July 2026, the VAT rate for essential products such as bread, milk, eggs, and fresh poultry is reduced for a period of one year. It has been subject tot he standard rate of 21%.
The government argues this step is necessary to cushion the impact of rising food costs, which have been a primary driver of inflation.
According to the Central Statistical Bureau (CSB) consumer prices in Latvia rose **4.1% in August 2025 compared to the same month a year earlier. The increase was largely fueled by higher prices for food and non-alcoholic beverages, especially coffee, poultry, chocolate, fresh fruit, eggs, butter, cheese, and curd.
Government raises VAT relief
The Finance Minister emphasized that while Latvia’s broader tax policy must ensure fiscal stability, targeted relief measures are needed to protect the purchasing power of low- and middle-income families. VAT cuts on essentials are seen as a way to provide direct benefits at the checkout, without requiring complex application processes or means-testing.
The temporary nature of the measure is intended to strike a balance between consumer relief and budgetary constraints. The government will reassess its impact in mid-2027.
Similar VAT cuts across Europe
Latvia’s move reflects a broader trend across Europe and beyond, where governments have turned to VAT reductions on essential goods to shield consumers from inflationary shocks:
Poland: In 2022, the government introduced a “zero VAT rate” on basic food items including meat, dairy, bread, and flour. Initially planned as a temporary measure during the energy and food price crisis, the policy was extended due to persistent inflationary pressures. This was withdrawn in 2024.
Germany: Berlin cut VAT on natural gas and district heating from 19% to 7% in 2022–2023 to soften energy price shocks, and has previously lowered VAT on restaurant meals during the pandemic. While not food staples in retail, the policy illustrates how VAT cuts can be used to target household essentials.
Spain: In early 2023, Spain scrapped VAT on bread, milk, cheese, eggs, fruits, and vegetables, while reducing VAT on pasta and cooking oils from 10% to 5%. These measures were introduced as part of a broader anti-inflation package.
Ireland: The government has periodically reduced VAT on energy and food-related services to shield households from price hikes, most recently extending a reduced 9% VAT rate on gas and electricity until 2030
