VAT Cut On Energy Products For All Users From 1 September

By , 29 Jul 2022, 11:12 AM Business
VAT Cut On Energy Products For All Users From 1 September Photo: WolfBlur CC-by-0

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STA, 28 July 2022 - The government decided to reduce value added tax (VAT) on energy products for all users at Thursday's session, Finance Minister Klemen Boštjančič told a press conference. The reduced tax rate of 9.5% will apply for the heating season, from 1 September to 31 May next year.

The government proposes to reduce VAT on supplies of electricity, natural gas, firewood and district heating. These are being proposed in a bill on emergency VAT measure to mitigate rising energy prices, which is being put forward to parliament to be passed in emergency procedure.

"By temporarily reducing the VAT rate from 22% to 9.5%, the government is addressing the impact of energy price increases during the peak energy consumption period, the heating season. The lower rate applies to all consumers of these energy products, both households and commercial," the Government Communication Office said in a press release.

The lower VAT on electricity and natural gas adds to the measures already taken to regulate the prices of these energy products, but when it comes to firewood and district heating, the reduced VAT rate is the first such measure the government is taking to mitigate price hikes, Boštjančič said.

VAT reductions cannot be applied to heating oil due to a European directive, and the government has limited options for wood biomass, where it cannot regulate prices. "We hope that the reduction in this area will not translate into higher margins of traders," he noted.

In the next steps, the government will also address the regulation of heating oil and district heating prices.

The lower VAT will result in a roughly EUR 130 million shortfall in the state budget, some EUR 40 million less this year and EUR 90 million less next year. The positive impact on households is expected to be between a few hundred euros and more than a thousand euros during the heating season, according to the minister.

He also announced that the government is "very likely" to prepare a supplementary budget for this year. "It is no secret that both the expenditure and revenue sides will be quite different from those in the adopted budget," he said.

Changes to the existing budget will be prepared while adopting the 2023 and 2024 budgets, and discussions on these will start after 20 August.

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