Tax Measures for Tackling the Increasing Energy Prices in Europe: An update from Austria, Bulgaria, Germany, Poland, Sweden, and the United Kingdom

In the wake of the energy crisis, the European Union and national governments have implemented various fiscal measures to relieve the strain on economies and help EU industries and citizens deal with rising energy prices. Tax is one of the most effective short-term solutions to level the playing-field whenever energy prices soar.

By the end of 2022, the EU had introduced several temporary measures such as a “solidarity contribution” levied on the “surplus taxable profits” of companies in the oil, gas, coal, and refinery sectors; as well as a revenue cap on companies generating low-cost electricity from wind, solar, and nuclear sources. In the sections below, we delve deeper into some Member States’ national implementation of the EU measures, other national tax mechanisms, and also the measures adopted in the UK.


1. Windfall tax and revenue cap on inframarginal electricity and gas producers

» A cap on the market revenues of electricity producers

Electricity producers and electricity traders must pay a targeted contribution on their market revenues that exceed certain mandatory caps that are determined depending on the sources of electricity generation. The targeted contribution will be paid for supplies made between 1 December 2022 and 30 June 2023. The contributions are paid into a dedicated “Electric Energy System Security” Fund and are treated as deductible expenses for tax purposes.

» Temporary solidarity contribution

EU companies and permanent establishments with activities in the crude petroleum, natural gas, coal and refinery sectors must pay a temporary solidarity contribution on their surplus profits. The rate of the solidarity contribution is 33% and it is calculated on the taxable profits in FY 2022 and FY 2023 that exceed a 20% increase of the average of the taxable profits in the fiscal years 2018, 2019, 2020 and 2021.

2. Energy taxation measures and other measures to compensate end-consumers for high energy prices

» A cap on the market revenues of electricity producers

The funds from the targeted contributions by electricity producers and electricity traders are used to compensate non-household final electricity consumers for the high electricity prices through their electricity suppliers.

» Zero excise on LPG, natural gas and electricity

From 9 July 2022 to 30 June 2025, excise tax has been abolished for the following products:
› LPG and natural gas used as motor fuels;
› Heat energy;
› Energy products used for the combined production of heat energy and electricity;
› Electricity under code CN 2716 produced from the following renewable sources:
» Solar, wind, wave, tidal or geothermal power;
» Hydroelectric power;
» Biomass or biomass-based products;
» Methane emitted from abandoned coal mines;
» Fuel cells.

3. VAT measures

A reduced VAT rate of 9% applies from 9 July 2022 to 1 July 2023 to the supplies of central heating and natural gas.