France Opens Public Consultation on Ending Reduced VAT for Electricity and Gas Subscriptions
On 5 June 2025, the Directorate-General for Public Finance launched a public consultation on proposed VAT reforms affecting electricity and gas subscriptions.
The changes include abolishing the reduced VAT rate currently applied to subscriptions for gas and electricity, and updating the definition of renewable energy qualifying for VAT relief on heat supplies.
Read more in our French VAT guide and check similar EU countries VAT rates in our global tracker.
Shifting electricity and gas to standard 20% VAT rate
Under Article 20 of the Finance Law, the standard VAT rate (currently 20%) will replace the reduced rate (5.5%) on electricity and gas subscriptions for all billing periods starting from August 1, 2025. This adjustment is based on the period covered by the subscription, not the date of invoice or payment. The updated guidance (BOI-RES-TVA-000209) offers clarification for annual and installment-based contracts.
The reform aims to align the VAT treatment of energy services with broader fiscal consolidation goals. By targeting fixed-fee subscriptions rather than variable usage, the measure avoids penalizing energy efficiency while increasing tax revenue.
Simultaneously, Article 32 updates VAT eligibility criteria for heat energy supplied via district networks. To retain the reduced 5.5% VAT rate, at least 50% of the heat must be generated from renewable energy sources as defined in Article L.211-2 of the Energy Code. These include wind, solar, biomass, geothermal, and certain by-product or recovery heat sources (e.g., waste incineration or grey water heat). This new definition took effect on 1 March 2025.
The 50% renewable threshold is assessed on an annual basis (year N-1), although adjustments are allowed for temporary disruptions or for new facilities striving to meet the threshold during the commissioning year.
June to September 2025 consultation
The public consultation is open from 5 June until 1 September this year, and stakeholders are invited to submit signed feedback. The feedback will inform potential revisions to the proposed rules.
These VAT reforms mark a significant shift in France’s energy taxation policy, targeting subscription structures while refining the definition and use of renewable energy within heat networks. Affected businesses, utilities, and energy providers are encouraged to evaluate compliance and billing systems in preparation for the upcoming changes.
