The European Commission has warned Spain that reducing VAT on fuels from 21% to 10% violates the EU VAT directive. The Spanish government defends the measure as temporary to ease energy price hikes due to the war in the Middle East. Brussels recommends cutting special taxes on hydrocarbons instead.
The European Commission sent a letter on March 28 to Spain and Poland reminding them that the VAT directive does not allow a reduced rate on fuel supplies. "In the letter we remind the national authorities that the VAT directive does not provide for the possibility of applying a reduced rate to fuel supplies," an EU spokesperson told EFE.
This VAT cut is part of the Spanish government's anti-crisis package announced at the end of March, worth about 5 billion euros, to counter energy price rises due to the war in the Middle East. Sources from the Ministry of Hacienda defend it as a temporary, non-structural measure and maintain constructive dialogue with Brussels. The VAT reduction will cost around 507 million euros until June 30.
Spain has already cut special hydrocarbon taxes to the EU minimum, with discounts of 14.49 cents per liter on 98-octane gasoline and 4.9 cents on diesel. The Commission stresses that measures should be selective and temporary, without boosting fossil fuel demand, and prioritize decarbonization. "Any effective national policy [...] must align with certain key principles," said Commissioner Valdis Dombrovskis.
Last weekend, Spain, Germany, Italy, Portugal, and Austria sent a letter to Brussels requesting taxes on energy companies' extraordinary profits.
