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VAT on domestic electricity supply to be reduced to 6% – but not for all

electricityThe Council of Ministers is expected to approve a decrease in VAT on electricity from 23% to 6%, now that Brussels has given the green light to the reduction.

The decrease in VAT is only for those customers whose contracted power is 3.45 kva.

The measure, which was entered in the 2019 State Budget, should cover around three million families for electricity and 1.4 million for a deduction in VAT on gas.

If consumers choose to lower the power to 3.45 kva, as suggested by the Environment Minister, João Matos Fernandes, they will be included in the VAT reduction.

“I suppose the vast majority of the Portuguese do not know what contracted power they have at home. And the one that has, most of the time, does not correspond to an informed choice but to a decision of the electricity marketer. It is normal for this to be so, but it’s not good,” Matos Fernandes said last November.

For consumers, the drop in VAT to the minimum rate will save 85 cents a month in the regulated market – €10 a year.

The Ministry of Finance reckons the measure will costs €19 million in loss of tax revenue, as detailed in the Stability and Growth Program.

Energy consumers have already had a drop in prices this year with Endesa, Goldenergy, Galp and EDP lowering prices.