El The VAT on electricity and natural gas will return to 21%. From June 1st, after more than a year of reduced rates to cushion the impact of the energy crisis linked to the war in IranThe change will mark a turning point in the bills of millions of households and businesses, who will see a significant part of the so-called tax shield deactivated.
This decision comes at a time when, paradoxically, energy has become cheaper. The latest Consumer Price Index (CPI) data shows that Inflation moderated in April to 3,2% year-on-yearThanks primarily to the drop in electricity and natural gas prices. It is precisely this price improvement that has triggered the clause requiring the early withdrawal of tax breaks.
Why is the VAT on electricity and gas rising again to 21%?
The Ministry of Economy, Trade and Business has confirmed that The withdrawal of extraordinary tax measures begins on June 1st. applied to electricity and natural gas. This means that the VAT on electricity, natural gas, briquettes, pellets, and firewood will no longer be at a reduced rate and will return to 21%, the standard tax rate.
The key is in one deactivation clause included in the latest anti-crisis decreeThe measure, approved in March in response to the war in Iran, stipulated that tax cuts could be brought forward if the year-on-year price increase for certain energy products remained below 15%. According to the latest CPI data, this condition is easily met in the case of electricity and natural gas.
In April, Electricity became 4,3% cheaper and natural gas 9,6% cheaper. compared to the same month last year. In other words, not only have they stopped rising, but they are now experiencing negative rates. With these figures in hand, the Government believes that the energy market has returned to sufficient normality to begin removing the tax shield on these supplies.
Sources in the Ministry of Economy insist that “The drop in electricity and natural gas prices allows us to begin the deactivation process” Regarding the VAT and Special Tax on Electricity reductions, the official interpretation is that the measures have achieved their objective of buying time and cushioning the initial blow of the crisis, but that they cannot be maintained indefinitely without taking into account the actual evolution of prices and public finances.
Which taxes exactly change from June 1st
The government's move is not limited to VAT. Starting June 1st, The usual rate of the Special Tax on Electricity is also reinstated.This tax, which was practically eliminated during the worst months of the crisis, will now increase from the previously applied 0,5% to its standard rate of 5%, further raising the tax component of the electricity bill.
In practice, the fiscal shift translates into three major changes for domestic energy supplies:
- Electricity It abandons the reduced VAT rate and returns to 21%, with the Special Tax on Electricity returning to 5%.
- Natural gas It also returns to the standard VAT rate of 21%, after months of applying a reduced rate.
- Solid biofuels for domestic use (briquettes, pellets and firewood) also recover the 21% VAT, which will increase the cost of this type of heating.
Despite this tightening, the Ministry maintains some pieces of the coat of arms until the end of JuneThe suspension of the Tax on the Value of Electricity Production will remain in effect until June 30th, preventing another tax from being passed on to consumers through the generation cost. This acts as a partial buffer for the system, although it doesn't fully offset the VAT-related increase.
The Executive branch points out that “The response plan has resulted in a moderation of nearly one percentage point in overall inflation.”In fact, according to their estimates, without the measures, fuel inflation would have been around 29% year-on-year, compared to a much more contained effective rate thanks to the tax discounts in force.
Impact on the bill: how much electricity and gas can increase in homes
The big question for any consumer is straightforward: How much will this change affect my home bill? Analysts agree that the effect will be immediate from June onwards, especially on electricity bills. The return to the 21% VAT and the 5% excise tax will result in a significant increase in the total amount, even if the price per kilowatt-hour on the wholesale market remains relatively low.
Estimates from various industry experts suggest that The average electricity bill could increase by around 15%. in June due to the simple tax effect. In practical terms, this could mean an extra cost of around 8 or 9 euros per month for a household with average consumption, although the exact figure will depend on each user's contract, the contracted power, and their usage habits.
In the case of natural gas, the impact will be somewhat less but equally noticeable. The return of VAT to 21% could represent a increase of around 9%-10% in the gas billAccording to initial market projections, the impact of this highly seasonal supply may be more limited in the height of summer, but it will be significantly felt if prices remain high when the heating season returns.
Behind these figures lies a structural reality: The wholesale price of energy only explains part of what the end customer pays.Various studies estimate that generation costs account for around 40% of the household electricity bill, while the remainder is made up of network tolls, system charges, commercial margins, and taxes. Although electricity is now cheaper wholesale thanks to... weight of renewablesThe return to normal tax rates may absorb much of that relief.
Therefore, many consumers may feel that, Despite headlines about cheaper energy, the bill is not decreasing at the same rate.The end of tax breaks reinforces this perception and once again focuses the debate on how the cost of the electricity system is distributed among energy, networks, charges and taxes.
Inflation is moderating, but the price problem persists.
The context for this fiscal decision is the recent evolution of the CPI. In April, the overall index stood at 3,2% year-on-year, two tenths lower than in March. Core inflation, which excludes fresh food and energy products, fell to 2,8%, confirming a certain relaxation of the underlying tensions in the Spanish economy.
According to data from the National Institute of Statistics, The fall in the price of electricity and natural gas has been one of the main factors that have allowed this reliefThe performance of package holidays also helped, as they rose less than a year earlier. In contrast, fuel prices continued to push prices upward, with notable inflation in diesel and gasoline, driven by geopolitical uncertainty.
This pattern is not uniform across the entire territory. Communities such as Madrid, Castilla y León and Castilla-La Mancha are registering inflation rates above the state averageWhile some regions, like Extremadura and Asturias, are experiencing more moderate increases, households across all autonomous communities are still feeling the rising cost of living, albeit at a slower pace than during the worst of the inflationary crisis.
In the breakdown by spending groups, transport, hospitality and some foods These categories stand out as putting the most strain on household budgets. Restaurants, accommodation, alcoholic beverages, tobacco, insurance, and financial services show year-on-year increases above the average. Although the rise in the cost of food has moderated, products such as certain vegetables, green legumes, eggs, and fish remain significantly more expensive than last year.
The Ministry emphasizes that the “renewable shield” And the package of response measures has been crucial in preventing much higher inflation. In fact, official calculations indicate that the aid has reduced fuel inflation by more than 16 percentage points compared to the theoretical scenario without intervention, and has contributed nearly one percentage point to moderating overall inflation.
Fuels, the big exception: tax cuts continue
While electricity and gas return to ordinary taxation, Fuels become the exception that maintains aid at least until June 30thThe same decree that allows for the early withdrawal of discounts on electricity and gas establishes that measures associated with gasoline, diesel and biofuels can only be deactivated when their year-on-year variation falls below 15%.
The data from April shows that “Fuels and lubricants for personal vehicles” remain above that thresholdDiesel, in particular, is experiencing inflation close to 28%, while gasoline is at more moderate, but still significant, rates. This trend, closely linked to international oil prices and tensions in the Middle East, has led the government to extend the relief package at the pumps.
Thus, The reduced VAT rate of 10% for petrol, diesel and biofuels remains in place.This includes reduced rates for the Hydrocarbons Tax and partial refunds for professional diesel fuel. The stated objective is to mitigate the impact on freight and passenger transport, sectors particularly sensitive to rising crude oil prices, and to contain the transmission of these costs to the rest of the economy's goods and services.
The Ministry of Economy insists that, Without this aid, fuel inflation would have been much more severe.Continued fiscal support is considered key to preventing a further rise in the CPI at a time when the European Central Bank is trying to consolidate the path of price moderation across the eurozone.
In any case, the timeframe for these measures is limited. The anti-crisis decree itself sets the June 30th as the deadline for the current fuel subsidy packageUnless a new decision by the Council of Ministers extends its validity or introduces a different design, the evolution of oil prices and the geopolitical situation in the coming weeks will be decisive.
What aid remains available for the most vulnerable households?
Despite the withdrawal of the tax shield on electricity and gas, the Government has opted to maintain various support measures aimed at particularly vulnerable groups to the rising cost of energy. The most relevant for low-income households is the electricity social voucher, which will continue with enhanced discounts at least until June 30.
Specifically, Vulnerable consumers maintain a 42,5% discount on the regulated part of the electricity billThose considered severely vulnerable benefit from a 57,5% reduction. These subsidies act as a safety net for those who have the most difficulty affording energy costs and have become a central tool in the government's social policy in this area.
Along with the electricity social voucher, the following will continue specific aid for farmers and transportersThese two sectors are particularly affected by rising energy and fuel costs. In their case, tax breaks, partial tax refunds, and direct support programs are combined to maintain their competitiveness and prevent a massive pass-through of costs to the price chain.
The Ministry emphasizes that The international context continues to be marked by strong uncertainty.They will therefore continue to "monitor price trends" in conjunction with social partners and various economic sectors. The aim is to adjust the level of protection based on how inflation, the energy market, and geopolitical tensions evolve in the coming months.
At the same time, the gradual withdrawal of aid also responds to a budgetary concernsThe tax cuts applied to energy mean lower revenue for the State, which limits the fiscal space available for other public policies. The Government argues that, now that prices have begun to moderate, it is reasonable to withdraw part of the tax shield to ensure the sustainability of public finances and to be able to focus efforts on the most vulnerable groups.
With all these pieces on the table, Spanish consumers face the start of summer with a mixed outlookOverall inflation is gradually easing, but the normalization of electricity and gas taxes threatens to erode much of the relief achieved. Meanwhile, fuel prices will continue to receive extraordinary support, at least for a few more weeks, in an international context that remains anything but stable.
