The electricity bill once again has a series of changes in July. First of all, VAT is falling again after the rise in wholesale market prices in July. A fact that has caused taxes to drop again from 21% to 10% in Spain.
From today, July 1, the VAT on electricity will return to 10%. A measure that was already contemplated in the limits set by the Government. This is precisely because the price in the wholesale market soared during the past month of June, being the second highest price of the whole year.
VAT is no longer at 21%
The electricity rate once again has a significant change in VAT. The increase in the average price of MWh that was registered in the wholesale market for June has caused it to be lowered again to 10%. This is mainly due to the fact that the average shot up to 56.04 euros/MWh. Therefore, the limit figure stipulated by the Government, which was 45 euros/MWh, was exceeded by almost 10 euros.
The limit on the average price was set in June 2021 through the Royal Decree-Law, which allowed for the adoption of urgent measures in the field of energy taxation and energy generation. This allowed for the reduction of VAT on electricity bills.
So, by rising on average to 56.04 euros/MWh, the reduced VAT has to be applied again for consumers in Spain. It must be remembered that, in March of this same year, the VAT was returned to 21%. The month of April even became the month with the cheapest electricity in history, even registering negative prices. The problem is that, in June, the situation changed.
Therefore, until market prices go down again, this tax will remain at 10%. However, that does not mean that consumers will pay less. The truth is that a good part of users will pay more, since, in this case, those who will notice some change are those who have a fixed-price tariff. Basically, because the price of electricity will continue to rise, since this is a price increase that is already typical of summer.
Other taxes that change on the invoice
VAT on electricity is not the only thing that changes on bills starting this month. In Spain there will be an increase in two taxes: IEE and IVPEE. Due to the Special Electricity Tax (IEE), it will recover its usual value on invoices. In 2023 it was lowered to 0.5%, in 2024 it rose to 2.5%, while in April it reached 3.8%. However, as of today, July 1, it recovers the 5.11% it had before applying the decrease.
On the other hand, the Electricity Production Tax (IVPEE), which is responsible for taxing electricity production, also increases starting this month. For a few months it was at 0%, although in March of this year it rose to 3.5% and subsequently reached 5.25% in June. Now, the tax will remain at 7%, as it was normally.
