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Fuel and Energy Prices Lowered by the European
Union to Slow Inflation

January 9, 2023

There has been considerable uncertainty about the uniformity of VAT rates when EU member states reduce their VAT rates on energy and gasoline. Do you know what's new? What you might anticipate in the near future and the reason for these price drops are discussed below.


VAT rates on energy and fuel prices have dropped significantly in Germany, Spain, and the Netherlands, and more EU member states are expected to follow suit.


In response to an unprecedented rise in inflation, a number of EU countries have said they will temporarily lower the VAT rates on domestic energy, gasoline, and food.


Why are there abrupt reductions in price? an effort to alleviate customers during a period of significant price inflation. However, the changes in the VAT rate have been met with criticism.


What You Need to Know?


EU member states may lower VAT rates on gas, electricity, and basic commodities without consulting with the EU. This was confirmed following the April 6, 2022 implementation of VAT rate freedom reforms. However, each nation has an own set of applicable legislation. Although they are permitted to reduce their VAT rates, the rates must remain under the 5% threshold.




In 2022, Germany faced an unprecedented rise in inflation. To alleviate the cost, the value-added tax on natural gas has been reduced from 19% to 7%. In addition, Germany has stated it would reduce gas VAT to 7% until March 2024.




Belgium reduces its energy expenses by 6%, demonstrating that this reduction is sustainable.




Spain cut the power VAT rate from 10% to 5%. (the minimum rate). From October 1st, VAT rates on natural gas, briquettes, pellets, and firewood will be reduced from 21% to 5%.




The VAT rate for the use of natural gas, electrical power, and district heating has dropped from 21% to 9%.




When inflation was at its highest level in 40 years, Ireland lowered the value-added tax on gasoline and electricity to 9% for six months.


As of right now, these discounted prices are scheduled to last through 31 December 2022, while some will remain in force until mid-2023 or beyond.


Opposition to Lower Energy VAT Rates


To lessen the economic impact of the 2020 COVID-19 pandemic, the EU allowed a select number of member states to temporarily lower VAT rates on certain products and services.


Some of the chosen countries included Austria and Germany.


In response to rising inflation and soaring costs for essentials like gasoline, electricity, and heating oil, several nations have lowered their VAT rates as a result of recent Freedom reforms. As was indicated before, the most recent changes to the EU VAT law have made it possible for all EU nations to lower their VAT rates as they see fit. However, this has added another layer of complexity to VAT systems, which were already difficult to understand and use.


The International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD) have both voiced more criticism towards the decreased VAT rates after reviewing VAT reductions and other policy measures.


Reducing taxes on natural gas has been a major source of worry since it has the potential to benefit customers from higher-income families and slow down energy-saving programs.


Confirm European VAT Rates


Without direction, navigating the ever-changing landscape of EU VAT rates may be difficult. You can talk to our specialists about the VAT treatment and any questions you may have.

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