The increase in electricity prices in June leads to a reduction in VAT from 21% to 10%.

The increase in electricity prices in June leads to a reduction in VAT from 21% to 10%.

It’s official now. VAT on electricity bills will return to 10% in July after rising electricity priceswhat led to the average power outage in June 56.08 euros on the wholesale marketup 84% from the previous month and four times more expensive than April, the cheapest month on record. At the same time, the special tax and the electricity production tax are increasing, returning to the original rates of 5.11% and 7%, respectively.

Late last year, the government decided to introduce a reduced VAT rate of 10% on electricity bills through 2024, provided that the price of a megawatt-hour on the wholesale market would be reduced to 10%. above 45 euros.

If it remains below that 45 euro mark, Initial VAT 21% next month, and if it remains above this rate, a reduced VAT of 10% will apply.

After four months with VAT at 21% (as electricity cost less than 30 euros in February, March, April and May), the average wholesale price rose to 56.08 euros per megawatt hourwhich is 84% ​​more than the previous month, according to data released by the Iberian market operator (OMI). This therefore exceeds the control threshold of 45 euros, which means reduction of VAT on July electricity bills from 21% to 10%.

The change will affect the majority 28 million small consumers that in Spain there are both those that have a free rate (19.6 million) and those that have a regulated rate, known as the voluntary price for small consumers or PVPC (8.5 million). In addition, the reduction of other taxes that affect the energy bill ends this Sunday. It means that special tax on electricity will increase from 3.8% to 5.11%.; Meanwhile he tax on the cost of electricity producedwhich affects electricity companies, but they return to users through the bill, will go away from 5.25% to 7%.

This tax change could mean decrease in income electricity from consumers 4 euros per monthin case of a user with monthly consumption 190 kilowatt-hours and a fixed tariff of 0.14 euros. per kilowatt-hour, according to home service comparator Selectra’s offers. The user in this example will go from paying €50.89 in June (21% VAT and 3.8% electricity tax) to paying €46.84 in July (10% VAT and 5.11% VAT).

Rest of the year

The reason for the rise in electricity costs last month is due to lack of wind And increase in water production costs, common at this time of year when there is a lot of dammed water, but there is no urgency to release it (there are no heavy rains overflowing the reservoirs), which drives down prices. And although he Sunwhich is typical for summer, reduces prices at certain times – for example, this Sunday at 3 o’clock in the afternoon it is zero euro – insufficient installed capacity

solar panels to meet demand.

And it will be trend for the coming monthsbased on electricity prices in futures market (where “traders” buy electricity that is supplied in another period and which serves as a reflection of the cost of electricity in this period), which are located from 76 to 86 euros from July to DecemberAccording to Omip. If so, VAT on the invoice will remain at the reduced rate for a year.since these prices are higher than the reference 45 euros.