Is the self-consumption of electric power generated small producers subject to the excise duty of electricity?
From 2015 the excise duty of electricity was changed from an excise duty of manufacturing to be configured as an indirect tax, which levy both, the supply of electric power for consumption and self-consumption by producers of electric power generated by themselves.
This new situation raised doubts regarding the consumption of electricity generated by small producers of electric power for themselves, as it is the case consulted to the Spanish General Tax Directorate (DGT) regarding companies that have installed solar photovoltaic plants and consuming most of the electricity for its own activity, as well as individuals who install plants in their home for power destined to their own home.
The DGT answers these questions in the Binding Tax Ruling number V3920/2015, from December 9th, 2015, providing a useful explanation of the operation of the electricity tax.
Firstly, the DGT explain that the taxable event is configured in two cases:
- The supply of electric power to a person or entity for its own consumption.
- The consumption by the producers of that electricity generated by themselves.
In regards to the scenario 1), the Law excludes from the taxable event consumption by generators or set of generators of capacity not exceeding 100 kW of electric power produced by themselves, trying to equate small producers of electricity with a limit of 100 kW.
On the other hand, the Law also provides two exemptions related to the consumption of electric power:
- Consumption by holders of power production facilities that are covered by the specific compensation arrangements (former special regime) according to the sectorial legislation, either that consumption occurs in the production facility or in a different one, provided that it has been produced by themselves and not acquired in the market.
- Consumption by production plants of electricity for carrying out such activity, as well as the power supplied to the facilities of production, transport and distribution for carrying out these activities therein.
In connection with these exemptions, recalls the DGT that there are formal requirements that taxpayers must meet to qualify for them, such as the obligation to register in the Register corresponding to the Local Management Office of Excise Duties, for which they must appear registered in the Census of entrepreneurs, professionals and withholders and be updated in the fulfillment of tax obligations along with Directors. Once registered, the Management Office will grant an “identification code of electricity” or CIE, which must be reported in the tax return to be filed by the taxpayer, a quarterly or monthly basis (Form 560 which will be payable provided that the tax is not exempted).
Furthermore, with regard to the scenario 2), clarifies the DGT that is subject to the tax the supply of electric power to a person or entity for its own consumption, leaving out from the tax the supply to a subject of the electricity market for distribution or commercialization.
Attached is a copy, in Spanish language, of the Binding Tax Ruling. In the wording of the ruling is included a summary of the tax implications for each of the scenarios, which is very useful.
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