| Update: | Compliance Alert - Spanish Government extends VAT rate reduction on certain measures |
| Date: | 2024-01-04 |
On 27 December 2023, the Spanish Council of Ministers approved a Royal Decree aimed at extending certain measures to address the economic and social consequences of conflicts in Ukraine and the Middle East, as well as to mitigate the effects of drought.
The measures include an extension of several VAT rate reductions from 1 January 2024, such as:
- Reduced rate of 10% on qualifying supplies of electricity until 31 December 2024;
- Reduced rate of 10% on qualifying supplies of natural gas until 1 March 2024, and
- Reduced rate of 10% on qualifying supplies of pellets, briquettes, and firewood for heating until 30 June 2024.
Additionally, there will be reduced special electricity tax rates of:
- 2.5% in the first quarter of 2024, and
- 3.8% in the second quarter.
The decree-law also extends reduced VAT rates on essential and basic food products until 30 June 2024, including:
- Reduction from 10% to 5% rate on olive and seed oils and, and
- Reduction from 4% to 0% rate on basic food products such as bread, bread flour, different types of milk, cheese, eggs, and fruits, vegetables, legumes, tubers, and cereals qualifying as natural products.
Finally, the Royal Decree 8/2023 grants the windfall tax on energy and banks extension in 2024, with a provision for their future review so that their full integration into the tax system might be possible. Windfall taxpayers in the energy sector can also obtain an incentive if they make investments in strategic industrial projects and decarbonization from 1 January 2024, which will be included as part of the Budget Law for 2024.