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Germany seeks EU Commission approval to cut VAT on Gas Levy

Finance Minister writes for permission to exempt VAT on upcoming €1,000 Gas Levy as energy inflation reaches 35.7%

Germany’s plan to impose a one-off Gas Levy on its consumers in September to help importers with the rising prices may come with a VAT exemption. The Finance Ministry has confirmed it has written to the European Commission to seek approval to derogate from the EU VAT Directive rate tules as it is looking to avoid full standard VAT on the upcoming bill for households.

Such a precedent on varying the VAT rates on the basis of an economic emergency would likely encourage other states to follow with exemptions on soaring energy prices.

German inflation reached 8.5% in July 2022. Energy inflation reached 35.7% in the same month.

The Gas Levy comes as costs of imports of gas following the Russian invasion of Ukraine spiral. The German levy will likely be between 1.5-5.0 euro cents per kilowatt hour (kWh) on consumers to pay for 90% of the higher cost of wholesale gas, plus an as yet unspecified levy for gas storage.  This could equal over €1,000 per average household before VAT. The pricing will be confirmed today, 15 August.

This comes as the heating costs for most German households has trebled since 2021.

European inflation VAT cuts have become popular across the region as inflation hits forty-year highs.

 

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