Denmark – VAT cut on Food

 The Danish government announced a political agreement to explore two primary models for reducing food prices, specifically targeting a 2028 implementation.

Proposed VAT Models
The government has earmarked DKK 6 billion annually to fund one of two potential reform paths starting in 2028:

Targeted Zero-Rate:
Complete removal of the 25% VAT on fruits and vegetables to promote healthier diets and ease household budgets.

General Reduction:
A broader, across-the-board reduction in the VAT rate for all foodstuffs, such as lowering the rate from 25% to 20%

Key Drivers and Timeline
The initiative is primarily a response to food price inflation, putting substantial pressure on Danish household budgets. Denmark currently has one of the highest food VAT rates in the European Union. The Danish Ministry of Finance is leading an analysis to determine which model offers the best balance between budget constraints and administrative simplicity.

– Late 2026: Final analysis and results of the study are expected.

– Late 2026: Likely timing for the next parliamentary election, after which formal legislative decisions will be finalised.

– 2028: Target year for the new VAT rates to take effect.

Technical and Structural Challenges
While permitted under EU VAT rules, implementing multiple rates is technically complex for Denmark. The current tax and IT infrastructure are not designed for differentiated rates, and experts suggest upgrades could take up to three years. Businesses, particularly retailers and food producers, would also face increased compliance complexity.

In the interim, the government is considering non-VAT measures and has already proposed other tax reforms for 2026, including abolishing taxes on chocolate, coffee, and confectionery, and introducing zero VAT on books.