Spain introduces VAT reduction on gas from 21% to 5%

by Lorraine Williamson
VAT on gas

Spain will lower the VAT on gas from 21% to 5%. This measure will take effect on October 1 and will last until the end of the year. The Spanish prime minister says he will fill the gap with extra tax for large banks and energy companies. 

It’s no secret that life in and outside Spain has become a lot more expensive. Inflation has not been this high in almost 38 years. Prime Minister Sánchez of Spain therefore announced today from Moncloa to lower the VAT on gas from 21% to 5% from October 1. This is to ease the financial pressure somewhat. He confirmed this measure on his Twitter account this morning. 

VAT reduction on gas bills

In principle, this VAT reduction will last until the end of the year. However, if the situation does not improve, the Spanish government can choose to also apply a lower VAT in 2023. 

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Two-track energy taxation policy in Spain 

During an interview with the Spanish channel Cadena SER on Thursday morning, the Spanish prime minister said that on the one hand he wants to support the Spaniards directly by collecting less VAT. To make up for that ‘gap’, the prime minister said that on the other hand, large energy companies and financial institutions, which benefit from rising energy prices, must deal with extra taxation to distribute the burden more fairly. 

Proposal on the table as early as April Spanish government 

The Popular Party already put this measure on the table in April 2022, but the parties within the Spanish government were against it. Nevertheless, this proposal was revived this week. After many talks, Pedro Sánchez announced it this morning. 

Nevertheless, the Spanish Prime Minister expressed his concern about the “very uncertain conditions and future of the economic situation in Spain, Europe and in the world.” While he is confident that Spain has sufficient reserves to get through the winter, he said this measure will ensure everyone can continue to pay their gas bill. 

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