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Germany slashes VAT on gas to 7% following EU block

Following refusal from European Commission to exempt new Gas Levy from VAT, Germany cuts VAT to reduced 7% from 19% until 31 March 2024

As Germany energy inflation hits 35.7%, the German government has today announced a cutting of the VAT rate on gas from 19% to 7% from 1 October 2022 until 31 March 2024. This will more than compensate consumers for the upcoming new Gas Levy (see below). The cost of the tax subsidy is estimated at €14 billion.

German is also rolling over the reduced 7% hospitality VAT cut into 2023.

The European Commission on 16 August 2022, turned down a request from the German Finance Ministry to exempt from VAT a one-off Gas Levy on its consumers starting in October for six months to help importers with the rising prices .  The Finance Ministry had confirmed it had written to the European Commission last week to seek approval to derogate from the EU VAT Directive rate rules as it is looking to avoid full standard VAT on the upcoming bill for households.

However, an EC spokesman has said that the Levy cannot be exempted from VAT since it is part of the pricing.

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 From 1 October 2022 to 31 March 2023, consumers will have to pay an extra EUR 0.02419 per kWh for natural gas.

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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