Government of Spain approves a VAT reduction on electricity

Spain has introduced temporary energy tax relief measures effective from March 21, 2026, reducing VAT on electricity from 21% to 10% and lowering other energy-related taxes to mitigate rising costs for households and small businesses amid geopolitical tensions.

In response to soaring energy prices triggered by geopolitical tensions in the Middle East, particularly the ongoing conflict in Iran, the Spanish government has announced a reduction in the Value Added Tax (VAT) on electricity.

VAT on electricity has been cut from 21% to 10%, the minimum allowed under EU regulations.

The special tax on electricity has been reduced from 5% to 0.5%.

The tax on electricity production (7%) has been temporarily suspended.

Similar reductions apply to other energy sources, including gasoline, diesel, and hydrocarbons.

The new tax rates came into force on March 21, 2026, following publication in the Official State Gazette. They will remain in effect until June 30, 2026, unless extended.

The VAT reduction applies to consumers with a contracted power of up to 10 kW, covering most Spanish households, SMEs, and self-employed workers.