Emergency VAT rate cut on electricity from 24% to 10% until 30 April 2023; public transport reduced to 0%
Finland’s President has signed a temporary VAT rate cut on domestic electricity in its 2023 Budget. This will be from the 24% standard rate to the reduced rate of 10%. This will be between 1 December 2022 and 30 April 2023.
At the same time, public transport VAT will be reduced from 10% to 0% from 1 January until 30 April 2023
The cost of the measures, which include electricity bill-based deductions on income tax or a direct subsidy for low-income groups, will amount to roughly 800 million euros in next year’s budget.
Finland’s June inflation rose to 7.8% from May’s 7.0%. Electricity inflation is running at over 22%. These are the highest inflation rates in almost 40 years.
European VAT inflation cuts have been widespread since the end of 2021 when inflation began to rise.
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EU VAT rate setting freedoms
From April 2022, EU agreed reduced VAT rate setting freedoms. This includes to cut rate below 5% for the first time on a limited range of supplies.