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Tax increases make gas and electricity prices more expensive in Spain as of today, 1 April
Energy prices

Tax increases make gas and electricity prices more expensive in Spain as of today, 1 April

The reduced IVA - Spain's sales tax - rate of 10% for gas supplies will return to 21% and the excise taxes on electricity are also increasing

Amparo Estrada

Madrid

Monday, 1 April 2024, 17:31

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Electricity and gas bills in Spain will become more expensive due to higher taxes from today, 1 April. The reduced IVA - Spain's sales tax - rate of 10% for gas supplies will return to 21%. In addition, both the Electricity Tax (IEE) and the Electricity Production Tax (IVPEE) will increase. IVA on electricity will remain at 21% on the bill to be paid this month.

The Spanish government announced IVA on gas would rise from 1 April from 10% to 21%, the level it was at before the anti-crisis measures came into effect (until December 31 it was at 5%). In the case of wood pellets, briquettes and firewood, ecological substitutes for natural gas from biomass and intended for heating systems, IVA will remain at 10% until 30 June of this year.

IVA on electricity already rose in March to 21%, since the government, in the anti-crisis decrees, announced it would only remain at 10% if the price of electricity on the wholesale market was below 45 euros per megawatt/hour. In February it averaged around 42 euros per megawatt/hour, so the existing subsidies were automatically eliminated, and in March the bill included 21% IVA.

In March, rain, wind and sun have once again put downward pressure on the price of electricity production: electricity cost an average 20 euros/MWh, half that of February and 77% less than a year ago, so IVA will remain at 21%. When in a month the average wholesale price exceeds 45 euros per megawatt/hour, the following month IVA will drop to 10%.

Free market

Those who are most affected by the increase in IVA on electricity are households and SMEs with free market contracts, as most of them (18 million) have a fixed tariff and have to bear the IVA increase without benefiting from the reduction in the price of electricity. Consumers - some nine million - who are on the regulated price market (PVPC) also suffer the IVA increase, but in their case the bill reflects the fall in the price of electricity, so the amount payable has hardly gone up and this month - for the same consumption - will probably go down, especially those who use electricity during the cheapest hours.

In the case of electricity, the rest of the taxes will also rise. The Special Electricity Tax (IEE), which was at 2.5% during the first quarter of the year, will increase to 3.8% during the second quarter. On 1 July it will rise again, recovering its original value of 5.11%.

The tax on the Value of Electricity Production (IVPEE), which until March had a rate of 3.5%, will now be 5.25% until June. After that, it will reach the usual 7%. This is a tax on electricity production: it is not reflected in the bill because it is paid by the energy producers, but it does indirectly affect the price of the offers available on the free electricity market.

From June 2021, the IVA to be paid on electricity consumption became 10% instead of the usual 21% to alleviate the effect of the energy crisis following the coronavirus. The war between Russia and Ukraine further complicated the situation and the government decided to apply a further reduction, leaving IVA on electricity at 5% in 2022. Last year the government approved to increase IVA on electricity from 5% to 10% and this rate would be maintained until the end of 2024, provided the MWh prices on the wholesale market remained high, above 45 euros/MWh.

All bills that include consumption for at least one day in March will be subject to 21% IVA. Only households with the 'bono social' are exempt from this increase, as their IVA will remain at 10% throughout 2024.

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