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Value-added tax on energy in Spain to be reduced

Value-added tax on energy in Spain to be reduced

VAT on electricity, gas and fuel is to fall to 10 % in Spain. What the measures mean for the Costa Blanca and energy prices.

Update (21/03):
The announced measures are now officially in force. With today's publication in the Spanish Official Gazette (BOE), the reduction in VAT on electricity, gas and fuel is effective immediately.

This means that the agreed relief will take effect immediately and should cushion the recent rise in energy prices in the short term - including for households and businesses in the Balearic Islands and on the Costa Blanca.

Publication - https://www.boe.es/boe/dias/2026/03/21/

Government plans to ease the burden on electricity, gas and fuel - effects also felt on the Costa Blanca

Spain is responding to rising energy prices as a result of the conflict in Iran: the government wants to reduce VAT on electricity, gas and fuel from 21 to 10 per cent. The decision is to be taken at an extraordinary Council of Ministers.

The issue is directly relevant for the Costa Blanca - from Dénia to Villajoyosa. Rising electricity and fuel costs are among the key expenditure factors for households, the self-employed and companies, particularly in the transport and service sectors.

Relief via several adjusting screws

In addition to the VAT reduction, Madrid is planning further measures in the energy sector. The special tax on electricity is to be significantly reduced, and a temporary suspension of the tax on electricity generation is also planned. Tax adjustments are also planned for solid fuels such as pellets and briquettes.

In contrast to the energy crisis after the start of the war in Ukraine, the government is not offering blanket fuel discounts this time. Instead, the focus is on targeted aid for particularly affected sectors - including transport, agriculture, fisheries and energy-intensive companies.

 

Focus on households

A central component of the package is the expansion of the so-called social tariff for electricity. Vulnerable households are to receive higher discounts in future in order to better cushion current energy costs.

In addition, tax incentives for the purchase of electric vehicles are once again being discussed. A corresponding deduction from income tax is under discussion, as previous regulations were not implemented.

Oil reserves are released

At the same time, Spain has decided to release strategic oil reserves. A total of 11.5 million barrels are to be placed on the market in order to dampen short-term price peaks. An initial portion will already be made available in the near future.

Decision imminent

The package of measures is to be passed by royal decree and then submitted to parliament for approval. The government wants to react quickly to the development of energy prices - with a direct impact on consumers and companies along the entire Costa Blanca.