What does the VAT discount on electricity cover?

Coup effect of Pedro Sánchez Government. Two days before the extension of the anti-crisis decree, the Spanish Government announced the reduction of VAT on electricity bills to 5%. includes an increase in prices including the electricity bill In recent months. Normally 21% at most, this rate was reduced to 10% a year ago when the rise in electricity prices began and is now expected to be minimized. While there are still many unknowns regarding the implementation of the measure, some of the keys are:

Why 5% rate?

this The European directive regulating VAT empowers member states to apply reduced rates gas, electricity and heatingbut to respect the minimum rate is 5%. This was communicated by Paolo Gentiloni, Commissioner for Economic Affairs, in a letter sent to 27 partners at the end of April this year detailing the financial measures that could be taken to tackle the current energy crisis. In other words, the Government cannot reduce the invoice to the minimum value added tax rate in Spain of 4%, but must do so at 5% at the most. This discounted rate can also be used for: solar panels, in which case the European Commission allows it to be reduced to zero. However, Brussels more than two different discounted rates.

Who was affected?

Currently, the current discount 10% VAT affects all consumers. Contracted power up to 10 kilowatts, provided that the monthly average price of the wholesale price of the previous month is more than 45 euros per megawatt hour. Currently, the electricity price is multiplying this figure by five. Therefore, if more details about the measure are not known, the VAT reduction to 5% will be affected if this situation does not change. all electricity bills households and SMEsboth free market consumers and regulated market (PVPC) consumers.

Are there any other taxes on the electricity bill?

Yes. In Spain, electricity is taxable in addition to VAT. Electricity Special Tax (IEE) applied to the contracted power and consumed energy time, as well as being part of the VAT base, ie having double taxation on the invoice. This tax is 0.5% since September last year, The minimum allowed by European regulations In addition, electricity is also affected by a tax levied. 7% Electricity Energy Production Value (IVPEE), companies pass it on to consumers with a surcharge on the invoice. This fee has been suspended for one year.

And fuels?

this petrol and diesel prices They also rose rapidly after the start of the war in Ukraine, which led the Manager to put a bonus of 20 cents on these fuels, to which was added another by the big oil companies. This Wednesday after the announcement Pedro Sanchez In the general assembly of the congress, Deputy of the People’s Party Juan Diego Requena Ruiz asked the manager: “What will happen to VAT on fuels?”. His interlocutor, Teresa Ribera, Third Vice-President and Minister of Ecological Transition, did not directly refer to this question, but the answer is that it will remain as it has been until now. Brussels does not allow the reduction of fuel VAT.

Source: Informacion

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