Electricity Tax. Reduced tax base, tax rate and treatment of direct contracting of access to the power line by the final client
Binding tax ruling V1856-19, issued by the General Sub directorate of Excise Duties on July 17, 2019.
An electricity trading company, through this consultation, wishes to clarify the tax treatment of the following issues:
- How to compute the minimum tax rate of the Electricity Tax, set forth in article 99.2 of the Spanish Excise Duties Law.
- In the event that for certain electricity supplies final clients would directly contract the access to the power line with the distributor and, the supply of energy is done by an electricity trading company, which of the two operators must check and, where appropriate, apply the minimum tax rate regulated in the aforementioned Article 99.2 of the Spanish Excise Duties Law.
In relation to the first of the issues raised, we would like to mention that Article 98 of the Spanish Excise Duties Law establishes certain cases to which a reduction in the tax base will be applied.
Likewise, article 99 of the Spanish Excise Duties Law, in its point 1, establishes the Electricity tax rate (5,11269632%) and, in its point 2, establish limits to some reductions of the tax base included in article 98. Specifically, the cases affected by Article 99.2 would be the following: agricultural irrigation, industrial activities whose electricity consumption represents at least 5% of the value of production and, vessels docked at port that do not have the status of private pleasure boat.
In this sense, when the electricity is destined to the industrial uses and vessels mentioned in the previous paragraph, the entire quotas resulting from the application of the tax rate set in section 1 may not be less than 0,5 euros per megawatt hour (MWh). When electricity is used for other uses (agricultural irrigation), the entire quotas resulting from the application of the tax rate set in point 1 may not be less than 1 euro per megawatt hour (MWh).
If the limits mentioned in the previous paragraph are breached, the applicable tax rate would be 0.5 euros or 1 euro per megawatt-hour (MWh) supplied, depending on the use, and will be applied to the total supply or consumption of the period expressed in megawatt hour (MWh).
With respect to the second of the issues raised, in the event that clients directly contract the access to the power line with the distributor and the delivery of energy is done by an electricity trading company, the following should be considered:
For the reception of electrical energy by the client, a transport or distribution network is needed that satisfies a price.
In the supplies made by an electricity trading company to an end consumer, two concepts that are part of the taxable base of the Electricity Tax are billed: contracted power and quantity of energy supplied. In both concepts the cost of the access to the power lines is usually included.
The structure of the access fee to the power line consists of a formula composed of a power term, an active energy term and, if applicable, a reactive energy term.
Thus, in the cases in which the client only contracts the supply of electricity with the electricity trading company, the latter would not know the power that the client has contracted for the purpose of access to the power lines with the distributor.
On the other hand, the distributor in these cases would only know the cost of the access fee to the power line billed to the client, ignoring the price of the energy that the client had freely agreed with the electricity trading company and of course the actual consumption of electrical energy for the period, Therefore, the distributor must apply the tax rate established in paragraph 1 of Article 99 of the Spanish Excise Duties Law in its billing.
Based on this, the electricity trading company with the data available, must verify that the tax resulting quota for each supply is not less than the amounts regulated in Article 99.2 of the Spanish Excise Duties Law.
However, due to the fact that the electricity trading company does not have, in all cases, all the necessary data to verify that the quota resulting from the tax for each supply of electricity is not less than the amounts regulated in article 99.2 of the Spanish Excise duties Law, it could be the case that the sum of the total quotas passed on to the client through the invoices of the electricity trading company and the distributor were higher than the quota that would have resulted if instead of two invoices, the client would have received a single invoice that integrates both the consideration related to the delivery of electricity, and the provision of the access to the power line.
In these cases, the client may request the refund of undue payments, due to the excess of the Electricity Tax charged.
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