The Government has finally made the decision to lower the VAT associated with the electricity bill in the extraordinary Council of Ministers this Thursday. The reduction will be from 21% to 10%, but from Moncloa this afternoon they have introduced some nuances as they try to favor access to a cheaper bill due to the high prices of the kilowatt / hour that are now given in the electricity market.

These are the keys to the measure:

It’s just a temporary sale

“Since the end of 2020 and more intensely in March 2021, the price of the wholesale electricity market in Spain is setting unusually high prices, which threaten to remain in the second part of 2021,” they say from the Government. However, from Moncloa they assure that the measure is temporary, until the end of the year, “without prejudice to the reforms that may be adopted permanently and structurally.”

Power limit

The Government says that the 10% VAT reduction will be applied until the end of the year “for all consumers with contracted power up to 10 kW”, which rules out the discount for consumers who require higher power, such as small companies or freelancers with need for high electricity consumption. “These powers are recommended for large houses such as chalets, with air conditioning and fairly frequent use of electrical appliances. Also suitable for small premises”, they say in Atlas Energía.

Depending on the electricity market

The reduction, according to the Government, will be applied “provided that the average monthly price of the wholesale electricity market is above 45 euros per MWh”. Otherwise, the value added tax would not be lowered.

Vulnerable consumers

The application of 10% VAT will be applied “to all severe vulnerable consumers until the end of the year,” according to the Government, a discount that in this case will be independent of the contracted power and the market price.

Other discount

The Government has also announced the “suspension of 7% of the Tax on the Value of Electric Power Production during the third quarter of this year.”


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