Portugal: Brussels gives green light to reduced VAT for gas, electricity

Portugal has been given a green light by the European Commission’s VAT Committee to apply a reduced tax rate to the fixed part of the bill for gas and electricity for customers with low power output.

A source contacted by Lusa on Tuesday said this came after a consultation made on 12 April by the government with the commission, which did not oppose the measure.

The Portuguese government can now go ahead with applying a tax rate of 6% to the fixed part of natural gas and electricity to customers with lower output, like families and services, the source said.

“With this step, Portugal met all of the requirements of the EU’s VAT [value-added tax] guidelines and can now decide when the measure will come into force,” the source told Lusa.

Member states have to consult the VAT Committee of the Commission to introduce these kinds of changes. Despite Brussels not having the competency to authorise the application of reduced taxes, these can only go ahead if the VAT committee does not object. This is one of the final stages of the process.

The measure is laid down in Portugal’s state budget for 2019, which foresees a VAT reduction from 23% to 6% to the fixed part of the bill for gas and electricity, but only for users with lower consumption rates.

According to consulting firm Deloitte, the monthly reduction in electricity and gas bills will not surpass two euros per household.

In October 2011, when the country was still under a €78 billion bailout programme it signed with its lenders from the European Union and International Monetary Fund, the VAT rate applied to electricity and gas was hiked up from 6% to 23%.