Spain introduces temporary VAT reductions on electricity

by Deborah Cater
Temporary VAT reductions on electricity from Thursday
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On Thursday, the Spanish government will approve VAT reductions to temporarily reduce customers’ electricity bills. In some cases, the VAT reduces to 10%. The tax on energy production will also be temporarily suspended.

The Spanish media La Sexta and El Periódico, among others, wrote about the government’s proposal to introduce temporary VAT reductions on electricity prices on Thursday.

Three decrees

Government sources said the Council of Ministers will approve three decrees on Thursday:

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  • Lowering the current 21% to 10% VAT for people who have entered a contract up to a consumption of 10 kW. This reduction is valid until the end of the year.
  • The same VAT reduction applies to all vulnerable consumers regardless of the contract they entered. This low-income group is currently also benefiting from a 40% discount on social security contributions.
  • The temporary suspension of the 7% tax on energy produced by energy companies that they pass on to their customers. This temporary suspension only applies during the third quarter of this year. However, it applies to all consumers regardless of their contract.

Distraction from pardons for separatist leaders

Ecological Transition Minister Ribera recently told Cadena Ser that in times of recovery, household bills should be eased, even if only temporarily. Opposition parties are said to have expressed dissatisfaction with these measures. They see this as a government diversion whilst they pardon the convicted Catalan leaders.

Electricity prices in Spain continue to rise

This decision is remarkable as electricity prices in Spain rose in recent weeks, yet the government announced last week it would not take any urgent measures. After several increases in recent years, Spain has one of the highest electricity prices in all Europe.

This is partly due to the increased use of air conditioners and fans in view of the high temperatures of recent times. EU electricity companies also have to pay increasing costs for the emission of pollutants.

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