Electricity bills in Spain to soar in 2025: VAT hike and social bonus changes
From January 1, VAT on electricity throughout Spain will revert to 21%, meaning far more expensive bills
Homeowners and renters in Spain need to prepare themselves for a nasty shock in their electricity bills in 2025. The Spanish government has officially confirmed that the VAT on electricity bills will revert to 21% on January 1 after a three and a half year reduction.
This bonus intentionally kept household bills relatively low to combat the cost of living crisis but in the new year, things are about to get a whole lot more expensive.
Way back in June 2021, Spain lowered electricity VAT to 10% and with no signs of the financial crisis easing off, this was further cut to 5% in July 2022. Fast forward to last year and with things gradually improving, the Spanish government increased bills by 10% again, so they have been gradually becoming pricier.
The impact on your wallet
January’s VAT hike will affect all electricity consumers, including those with fixed-price contracts.
According to estimates, an average household will pay an extra 5.42 euros per month, or around 65 euros per year, due to the tax increase.
Small and medium-sized businesses, which account for 99% of the business sector in Spain, will be hit even harder, with some facing an additional 114 euros per month, or 1,372 euros per year.
Needless to say, people aren’t thrilled at the prospect of more expensive bills and the Organisation of Consumers and Users (OCU) is demanding major changes. Sources in the energy sector point out that it makes no sense for electricity to continue to bear a 21% VAT, and countries such as Portugal and Belgium already apply a reduced rate across the board.
In addition to the VAT hike, the Special Tax on Electricity (IEE) will also increase. This tax, which was suspended in 2021, has been reintroduced in tranches, with a current rate of 5.11%. The IEE is an ‘ad valorem’ tax, meaning it's based on the value of the fuel, and is used to fund subsidies for renewable energy and compensation for non-island territories.
The social bonus
The social bonus, a discount on electricity bills for vulnerable consumers, will also undergo changes in 2025. The extra discounts will disappear completely, although partial reductions will continue.
Going forward, lower-income consumers will receive a 50% discount from January to March, 42.5% from April to June and 35% from July onwards.
Severely vulnerable consumers will receive a 65% discount from January to March, 57.5% from April to June and 50% from July onwards.
The changes to the social bonus will affect nearly 1.8 million households, including 833,753 vulnerable consumers and 925,590 severely vulnerable consumers. The cost of financing the social bonus is expected to be 284.8 million euros in 2025.
Image: Archive
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