December 27, 2023.- The Council of Ministers today approved the extension of numerous tax measures that represent fiscal relief for the population and companies, in line with the tax reforms or reductions that were promoted since 2021 to counteract the economic consequences of international conflicts or tensions in the energy markets. All of them have been included in the Royal Decree-Law adopting measures to deal with the economic and social consequences of the conflicts in Ukraine and the Middle East, as well as to alleviate the effects of the drought. A text that involves reductions in taxes and tax benefits of more than 2,500 million euros during the year 2024.
This package of measures includes the extensions of measures that already entered into force in 2022 or began their journey in 2023. The evolution of the economy and prices has seen improvements precisely in that last year. This development has been significantly influenced by the successive RDLs approved by the Government, which have resulted in savings of more than 25 billion euros for both citizens and companies.
Even so, the Executive is aware that the uncertainty of war and inflation continue to afflict the world economy. Therefore, it is necessary to extend aid that expires on December 31, 2023 during 2024. Some of which will remain throughout the year, while in other cases a period of validity will be provided until June 30 of next year.
Electricity and gas bills
In the field of energy, the tax rebate on the VAT of electricity consumed by households is maintained. The VAT rate will be reduced by 10% on all components of the bill for electricity deliveries. This measure will cover the whole of the year 2024. Before the energy crisis, the taxation was 21%.
For the gas bill, the same 10% tax will be applied. A tax rebate that will be valid from January 1 to March 31 of next year. This type of VAT will also apply to pellets, briquettes and firewood, ecological substitutes for natural gas from biomass and intended for heating systems. The period covered by the application of this rebate will cover 1 January 2024 and 30 June of the same year. Before the crisis, the VAT in both cases was 21%.
The Special Electricity Tax will also maintain a reduction in its tax rate in the first half of 2024. During the first quarter of that year, the EEI rate will be set at 2.5%. In the second quarter, this will go up to 3.8%. This tax reached 5.113% before the government began to promote measures.
Regarding the Tax on the Value of Energy Production, a gradual recovery of the Tax is promoted after the fall in electricity prices and the normalization of the electricity market. During 2024, the tax base will be the total amount that corresponds to receive the taxpayer for the production and incorporation into the electrical energy system. In the first quarter, this base will be reduced by half of the remuneration corresponding to the electricity incorporated into the system. In the second, it will be in a quarter of the remuneration of the electricity incorporated into the system.
All these measures will guarantee the objective of maintaining a significant reduction in household energy product bills, particularly during the winter period. This will be combined with the normalization of market prices, which have experienced substantial reductions with respect to periods of greater tension, such as the wholesale market price record of 2021 and the Russian invasion in Ukraine initiated in February 2022.
Food VAT
The tax rebate on food that has been in force throughout 2023 will be extended until June 30, 2024. Pastes and olive oils and seeds will also continue with the reduced VAT of 5% as has been the case up to now. In addition, those considered as staple foods will maintain a VAT rate of 0%. This will affect the following:
- Common bread, as well as frozen common bread dough and frozen common bread intended exclusively for the preparation of common bread.
- The bread flours.
- The following types of milk produced by any animal species: natural, certified, pasteurized, concentrated, skimmed, sterilized, UHT, evaporated and powdered.
- The cheeses.
- The eggs.
- Fruit, vegetables, vegetables, legumes, tubers and cereals, which have the status of natural products in accordance with the Food Code and the provisions issued for its development.
These measures that seek to keep the shopping cart cheaper will continue to be for the consumer only. Therefore, such a reduction cannot be dedicated to increasing margins of business profits that can lead to an increase in the production chain
Energy efficiency
The text of the RDL reinforces the Government’s commitment to promote the energy rehabilitation of homes or buildings, by extending the deductions of income tax linked to the works carried out for that purpose. For this reason, all measures aimed at reforms that help to achieve a more sustainable consumption of energy, whether in private homes or in blocks of neighbors, are extended until December 31, 2024.
This aid, linked to the Recovery, Transformation and Resilience Plan (PRTR), will allow the deduction of 20%, 40% or 60% of income tax to those who promote these actions on their properties. Percentages subject to the type of housing and the depth of the works that are carried out to achieve the objective of reducing consumption and obtaining the corresponding certificates that endorse it.
Along with the above, we must highlight the extension in the freedom of amortization for those investments that use energy from renewable sources.
Autonomous
The Executive will continue to support self-employed workers by maintaining the aid and tax benefits approved in recent years to facilitate their work. To this end, they will be allowed to apply the objective estimation method for the calculation of the net yield of their economic activity.
This will avoid an increase in their obligations, since during 2024 the quantitative limits that delimit in the Income Tax of Natural Persons the scope of application of the objective estimation method will be extended.
The exception is agricultural, livestock and forestry activities, which already have a quantitative limit by specific volume of income. The same will happen with VAT, when the limits for the application of the simplified scheme and the special scheme for agriculture, livestock and fisheries will be extended next year.
Energy, banking and solidarity levies
The RDL includes the extension during 2024 of the two temporary levies provided for in Law 38/2022, of December 27, for the establishment of temporary energy levies and credit institutions and credit financial establishments. In addition, the RDL contemplates the future review of both levies for their full integration into the tax system. Likewise, a possible consultation with the communities of the Basque Country and Navarre is also planned.
The text also proposes the establishment in the General Budget Law of 2024 of an incentive for those obliged to pay in the energy sector to access it if they make strategic investments since January 1, 2024.
Finally, the application of the Temporary Solidarity Tax of the Great Fortunes is extended as long as there is no revision of the patrimonial taxation in the CCAA. This circumstance is linked to the reform of the regional financing system.