The government of Pedro Sánchez announced a VAT reduction on gas from 21% to 5%, effective from October through December 31 and potentially extended. The move aims to ease what has become a steep monthly bill as colder weather drives higher consumption and wholesale hydrocarbon prices have surged in response to sanctions tied to the Ukraine conflict. Preliminary estimates from consumer groups suggested savings of between 5 and 19 euros per month, though several details of the rollout remain uncertain.
How much will be saved on an average bill?
According to FACUA, average monthly savings are expected to range from five to nine euros. A household using about 400 kWh per month under TUR1, which covers typical cooking and hot water needs up to an annual consumption of 5,000 kWh, would move from paying roughly 35.92 euros to about 31.17 euros monthly. For those with an 800 kWh monthly usage under TUR2, which spans 5,000 to 15,000 kWh annually and often includes gas heating, the monthly bill would drop from around 67.76 euros to 58.80 euros.
Another group, OCU, estimates savings of eight to ten euros in TUR and up to 19 euros in the liberalized market. If these savings endure for a year, a typical regulated-market consumer could save about 103 euros, bringing yearly costs down from 789 to 677 euros. In the liberalized market, annual savings could be as high as 227 euros, reducing costs from 1,719 to 1,492 euros.
Why set the VAT at 5%?
The European directive on VAT allows member states to apply reduced rates on natural gas, electricity, and heating with a minimum threshold of 5%. This framework was outlined in a letter from Paolo Gentiloni, Commissioner for Economic Affairs, to the 27 EU partners in late April, detailing possible financial measures to address the energy crisis. In practice, the government can reduce the invoice but cannot drop it below the 5% minimum rate for gas and related energy bills.
Who is affected?
The leadership did not specify whether the discount would apply to all gas consumers or only households. It is unclear whether the measure covers every tariff class or only a subset. For reference, gas VAT reductions on electricity bills previously applied across the board, with electricity bills following a similar path from 21% to 10% and then to 5%, provided certain consumption thresholds were met. The policy targeted all electricity customers, including those on both free and regulated markets, as well as small and medium enterprises.
When does it start?
The discount is slated to begin in October. The government framed the timing around the winter heating season, noting that the higher gas use during colder months makes relief timely. The measure is designed to last through December 31, with room for extension if the situation warrants. The administration signaled that it could be extended into the following year as circumstances evolve.
How much revenue will the government lose in the period?
The Finance Ministry reported an approximate impact of €190 million in public revenue from October through December. It was noted that the VAT cut on gas would have a smaller effect on state coffers than the electricity reductions, which included further tax relief and suspensions already implemented since last summer. By December, the state is projected to have foregone more than €10 billion on these measures in total.