Government will increase electricity taxes

During the meeting of the Council of Ministers on Wednesday 27 December, the government gave the green light to the eighth anti-crisis package. These measures aim to support Spanish citizens in the face of the economic challenges arising from the COVID-19 pandemic and the conflict in Ukraine. While many of the previously approved measures will be maintained, some, such as the reduction of VAT and other taxes on electricity, will undergo changes that will result in higher gas and energy bills by 2024.

How much will electricity taxes increase in 2024?

VAT – VALUE ADDED TAX

Among the measures announced was an increase in VAT, which had been reduced in previous years. The government’s objective is to progressively increase this tax until it returns to the normal rate of 21%. However, for the whole of 2024 it will continue to have a reduced value of 10%.

How and when does the VAT increase apply to electricity bills?

• Con efectos desde el 1 de enero de 2024 y vigencia hasta el 31 de diciembre de 2024, se aplicará el tipo del 10 por ciento del Impuesto sobre el Valor Añadido a las entregas, importaciones y adquisiciones intracomunitarias de energía eléctrica efectuadas a favor de:
  • Holders of electricity supply contracts, whose contracted power (fixed power term) is less than or equal to 10 kW, regardless of the voltage level of the supply and the type of contract, when the arithmetic average price of the daily market corresponding to the last calendar month prior to the last day of the billing period has exceeded 45 euros/MWh.
  • Holders of electricity supply contracts who are recipients of the bono social de electricidad and are recognised as severely vulnerable or severely vulnerable at risk of social exclusion, in accordance with the provisions of Royal Decree 897/2017, of 6 October, which regulates the figure of the vulnerable consumer, the bono social and other protection measures for domestic electricity consumers;
• In addition, with effect from 1 January 2024 and valid until 31 March 2024, a 10 percent rate of Value Added Tax will be applied to deliveries, imports and intra-Community acquisitions of natural gas.

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SPECIAL TAX ON ELECTRICITY

How and when does the excise tax increase apply?

From 1 January 2024 until 31 March 2024, the Special Tax on Electricity shall be levied at the tax rate of 2.5 per cent, and, since the 1 April 2024 until 30 June 2024, at the tax rate of 3,8 per cent.

*The new values for the second half of 2024 have not yet been published.

The amounts resulting from the application of these tax rates may not be less than the following amounts:

• 0.5 euros per megawatt-hour (MWh), when the electricity supplied or consumed is used for industrial purposes, on vessels berthed in port that do not have the status of private pleasure craft or in rail transport;
• 1 per megawatt-hour (MWh), where the electricity supplied or consumed is used for other purposes.

Where the condition set out in the preceding paragraphs is not met, the amounts indicated therein shall be considered as tax rates and shall be applied to the total supply or consumption for the period expressed in megawatt-hours (MWh).
For these purposes, they are considered to be industrial uses:
(a) those carried out at high voltage or in industrial plants and installations.
(b) low voltage for agricultural irrigation purposes.
The minimum tax set out in the letters (a) and (b) above shall not apply to the cases referred to in points (a) (b), (c) and (d) of Article 98(1) of Law 38/1992 of 28 December 1992 on Excise Taxes

** This minimum quota application remains unchanged.

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ELECTRICITY GENERATION TAX

Finally, other electricity taxes will return to normal, such as the eliminated tax on electricity generation, which had been suspended for two years and which will be progressively recovered from 3.5% in the first quarter to 5.25% in the second quarter. While this impacts power generation companies, it is very likely that these increases will be passed on to the final consumer.

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Modification of electricity tolls.

Finally, another of the electricity factors that will undergo a variation are the tolls. Electricity access tolls are charges regulated by the Spanish Government that all electricity users pay on each bill. These costs, related to the maintenance, distribution and use of the electricity grid, fluctuate according to the contracted power.

For 2024 new values have been published that may modify and increase the bill. As they are linked to the contracted power, they may vary according to the customer and their contract.

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More detailed information on these amendments can be found in the Official Gazette of the Spanish Government: https://www.boe.es/diario_boe/txt.php?id=BOE-A-2022-21799