The Netherlands has 9% VAT on restaurant food. It isn't saving its restaurants

The Netherlands charges VAT at 9% on restaurant food and soft drinks, less than half the UK's 20%. Yet Dutch hospitality is dealing with rising debt, falling volumes, high wages, and far more bankruptcies than before the pandemic. A lower VAT rate buys headroom. It does not buy a business model. With no VAT cut in the UK's Autumn Budget, that is now the practical point: survival depends on prices, labour, and cash control, whatever the tax rate.

The experiment the UK debate rarely mentions

For months, the UK campaign asked for hospitality VAT to fall from 20% to 10%. The Autumn Budget of 28 October 2026 did not deliver it. Before deciding what that means for your business, it is worth looking at a country that already has the lower rate.

In the Netherlands, food and non-alcoholic drinks in hospitality are taxed at 9%. Alcohol is taxed at 21%, and hotel stays moved from 9% to 21% in January 2026. That last change has caused the most visible pain: a study of about 600 Dutch hotels by Mews found operators absorbing roughly half of the increase themselves, to protect bookings. There was no painless option. Pass it on, and you lose guests; absorb it, and you lose margin.

A low rate has not removed the stress

The more telling evidence comes from restaurants, cafés, and bars, where the 9% rate still applies.

• About one in five Dutch hospitality businesses is reported to be carrying problematic debt, against about one in fourteen companies generally.
• Hospitality bankruptcies ran at about 377 in 2024 and 347 in 2025, against 134 in 2022.
• ING expects hospitality volumes to grow by only about 1% in 2026, after 0.5% in 2025 and a fall in 2024, even as prices keep rising.

These are not the figures of a sector rescued by a low tax rate. They are the figures of one in which VAT is one line in a much bigger calculation.

Labour is the cost a tax rate cannot hide

Dutch restaurants spend about 35% of their revenue on wages. Hospitality is labour-intensive everywhere, and wages do not wait for a government to change VAT. The Dutch trade association, KHN, describes the position as an accumulation: higher staff, energy, and local costs, on top of the accommodation increase, with reserves running out and prices that can no longer rise without losing guests.

That is the question underneath every VAT debate: how much more can the guest reasonably be asked to pay? Britain, Spain, and the Netherlands are all asking it, at three different tax rates.

What the UK campaign got right, and what it missed

The case for a cut had merit. Lower VAT would have given VAT-registered operators real headroom after years of rising wages, energy, rent, and supplier prices. But the Treasury's objections were not unreasonable either. A cut costs billions, and around 45% of independent operators are below the VAT registration threshold, so a blanket cut would not reach many of the smallest businesses at all.

Above all, a cut would not have repaired a menu priced on guesswork, labour that does not match trade, weak buying, or too much debt. The Dutch evidence shows that clearly.

Spain, the other half of the experiment

Spain already charges 10% on most hospitality. Its operators still face rising labour costs, which can take 30% to 35% of revenue, and destinations such as Málaga, where strong visitor numbers have not guaranteed strong spending per guest. Three countries, three VAT rates, and the same margin problem.

What actually decides survival

Tax policy is the weather, not the strategy. It can make a sound business more resilient, or make a fragile one fail sooner, but it cannot replace control. The useful questions are practical:

• Are you measuring sales before VAT, or treating the takings as revenue?
• Do you know your prime cost, food, drink, and labour together, every week, not just at the year end?
• Are your prices based on the tax rate you actually pay, now that 20% is staying?
• Does your menu fit the team you can recruit and keep?
• Do your opening hours pay their way, session by session?

With the Budget behind us, plan on 20%. Any future cut is a bonus, not a business plan.

If you would like those questions answered for your own venue, a Hospitality Health Check is the place to start.