International VAT Rate Round Up: June 2026

The June edition of our International VAT Rate Round Up highlights the latest updates from Austria, Croatia, Czech Republic, Denmark, Ecuador, Indonesia, Macedonia, Mexico, Poland, Slovenia and Switzerland.

This month’s update sees several jurisdictions implementing temporary or proposed VAT rate changes to address inflationary pressures or fund policy priorities, particularly in fuel and essential goods.

Austria

On 21 May 2026, the Austrian Parliament announced the approval of a reduced VAT rate for the supply of selected foodstuffs. 

Under the proposed measure, the VAT rate will be reduced from 10% to 4.9% with effect from 1 July 2026. 

The preferential rate will apply only to the domestic supply and import of specified food products. Restaurant and catering sales will not fall within the scope of the reduced rate. 

The selected foodstuffs eligible for the reduced VAT rate are: 

• Milk 

• Yogurt 

• Butter 

• Eggs 

• Vegetables 

• Fruits 

• Rice 

• Flour 

• Pasta 

• Bread 

• Salt 

According to the legislative proposal, the measure is intended to provide relief to citizens and is expected to have significant impacts on the financial sector, social sector, equality, and the overall economy. 

The bill amending the Austrian VAT Act is currently progressing through the legislative process in the National Council. 

Croatia

On 10 April 2026, the Ministry of Finance submitted a proposal to amend the VAT Law for public consultation. 

The draft legislation introduces a new Article 38a, which would empower the Government to determine, by decree, the VAT rate applicable to excise-duty energy products. 

The measure would eliminate the need for legislative amendments each time an adjustment to the VAT rate is considered necessary. 

Under the proposal, the Government could, in special circumstances and for a limited period, set the VAT rate on energy products by decree for purposes such as market stability, consumer protection, market regulation or other justified reasons. 

The provision is intended to provide greater flexibility, particularly in the event of disruptions in the energy market. 

The law would enter into force on the first day following its publication in the Official Gazette. 

If the proposal is adopted, a decree reducing VAT rates on fuels is expected to be issued shortly thereafter. 

Czech Republic

Bill No. 168 amending the VAT Act was submitted to the Chamber of Deputies on 16 April 2026. 

The proposal sought to introduce a second reduced VAT rate of 6%, alongside the existing standard rate of 21% and reduced rate of 12%, thereby re-establishing a three-rate VAT system. 

Under the draft legislation, the 6% rate would have applied to a targeted list of essential and socially sensitive goods. 

These included selected basic foodstuffs, such as vegetables, fruits, eggs, rice, certain milling products and pasta, as well as drinking water, infant and baby food, feminine hygiene products and baby diapers. 

The stated objective of the proposal was to improve the affordability of essential goods and mitigate the impact of inflation, particularly for low- and middle-income households. 

By applying a lower VAT burden to products with high price sensitivity and significant social importance, the bill aimed to provide targeted consumer relief. 

Despite these objectives, the legislative process did not progress. 

In mid-May 2026, the Government rejected the proposal at its first reading, and the bill was not considered further. 

Denmark

The Danish Parliament is progressing with legislative plans to abolish VAT on books, including those supplied electronically and in audio format, as part of a broader tax reform package. 

Bill L 125, which includes a wide range of tax measures, was formally presented on 25 February 2026 and is scheduled for its first reading on 17 March 2026. 

Among its key proposals is the introduction of a zero VAT rate on books, aligning Denmark with the flexibility provided under EU VAT rules for reduced or zero rates on publications, including digital formats. 

The bill also forms part of a broader initiative containing amendments to excise duties and the VAT Act, reflecting a policy objective to reduce certain consumption taxes and enhance cultural and educational access. 

If adopted following completion of the parliamentary process, the proposed changes, including the zero-rating of books, are expected to enter into force on 1 July 2026. 

Ecuador

With Executive Decrees No. 368 and 39, the President has announced a temporary reduction of the general VAT rate from 15% to 8% for the provision of all qualifying tourist services during the May holiday periods. 

The reduced rate applies to the following dates: 

• Labour Day period: 30 April – 3 May 2026 

• Battle of Pichincha period: 23–25 May 2026 

In accordance with Article 5 of the Tourism Law, the VAT reduction applies to services defined as tourist activities, including: 

• Accommodation 

• Food, beverages and entertainment 

• Travel agencies 

• Tourist transportation 

• Organisers of events, congresses, conventions, meetings, incentives, fairs and exhibitions 

• Convention centres, reception halls and banquet facilities 

• Tourist guiding services 

• Community tourism centres 

• Theme parks and permanent attractions 

• Spas, hot springs, and tourist recreation centres 

Businesses providing eligible services are required to issue invoices applying the reduced 8% VAT rate during the specified periods. 

Indonesia

Regulation PMK No. 4/2026, issued on 6 February 2026 and published in the Database Peraturan, introduces a temporary VAT incentive for domestic scheduled commercial air transportation in economy class. 

The measure is intended to support purchasing power and stimulate domestic travel during the Eid al-Fitr 1447 Hijri holiday period. 

Under the scheme, VAT on eligible domestic air tickets is fully exempt, with the government bearing 100% of the VAT cost under the 2026 fiscal budget. 

The incentive applies as follows: 

• Ticket purchase period: 10 February 2026 – 29 March 2026 

• Flight period: 14 March 2026 – 29 March 2026 

Air transportation business entities are required to comply with the following obligations: 

• Issue tax invoices or equivalent documentation for each transaction 

• Submit periodic VAT notification letters in accordance with applicable tax regulations 

The regulation forms part of a broader policy package aimed at supporting mobility and economic activity during the holiday season. 

Macedonia

At the end of March 2026, the Government of North Macedonia published a measure in the Official Gazette (Службен весник на РСМ No. 60/26) reducing the VAT rate on certain fuels from 18% to 10%. 

The measure was introduced in response to elevated fuel prices linked to the Middle East conflict. 

The reduced rate was initially applicable until 6 April 2026 and has since been extended on several occasions. 

It is currently in force until 1 June 2026.

Mexico

Various tax incentives apply to Mexico’s Northern and Southern border regions, including a reduced VAT rate of 8%, representing a 50% reduction from the standard rate of 16%, for transactions carried out within designated areas. 

These incentives were originally introduced in December 2018 for the Northern border region and in December 2020 for the Southern border region. 

They have since been extended through successive decrees. 

The most recent extension provides that the reduced VAT regime will remain in force until 31 December 2026. 

The measure forms part of Mexico’s broader policy framework aimed at supporting economic activity and competitiveness in border regions. 

Poland

The Polish government has announced a further extension of the reduced VAT rate on petrol, diesel, and biocomponents used as standalone fuels until 15 June 2026. 

The measure reduces the VAT rate from 23% to 8% and was initially introduced at the end of March, with an original expiry date at the end of April. 

The extension forms part of the government’s CPN programme, aimed at mitigating fuel price pressures. 

Notably, the initial draft legislation had proposed a longer validity period, covering the period from 15 March 2026 to 30 June 2026. 

Slovenia

The Decision on the Act on Intervention Measures for the Development of Slovenia (ZIURS, EPA 15 X) was published in Official Gazette No. 771 on 28 May 2026 and entered into force on 29 May 2026. 

Among other measures, the Act introduces a temporary reduction of the VAT rate on selected energy products. 

The reduced rate applies to the following supplies: 

• Electricity (tariff code 2716 00 00) 

• Natural gas (tariff codes 2711 11 00, 2711 21 00, and 2711 29 00) 

• District heating (classified under standard activity classification code D/35.30) 

• Firewood (tariff code 4401) 

For a limited period of up to nine months, these supplies will be subject to a reduced VAT rate of 9.5% instead of the standard rate of 22%. 

To implement the measure, Annexes I and IV of the VAT Act (ZDDV-1), which define goods and services eligible for reduced VAT rates, will be amended accordingly. 

The amended annexes will take effect on 1 July 2026 and will apply until no later than 31 March 2027. 

The reform forms part of broader intervention measures aimed at supporting energy affordability and economic development in Slovenia.

Switzerland

Switzerland is set to prolong the application of its reduced VAT rate for accommodation services, with a new proposal aiming to extend the measure until 31 December 2035. 

Under the current framework, the special VAT rate applicable to accommodation services is scheduled to expire on 31 December 2027. 

From 1 January 2028, these services would revert to the standard VAT rate of 8.1%. 

However, recent legislative developments indicate a possible revision of this timeline. 

On 15 April 2026, a draft bill was submitted to the Swiss Parliament proposing the continued application of the reduced rate. 

The proposal was subsequently published on the Federal Law Platform on 8 May 2026, marking the next stage in the legislative process. 

The extension reflects ongoing policy support for Switzerland’s hospitality sector, which has historically benefited from the reduced VAT rate as a measure to enhance competitiveness and tourism. 

The proposal is still under legislative consideration. 

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