Article courtesy of Sladjana Djunisic at Renewables Now, image courtesy of Chris Boland on Unsplash
The so-called “windfall tax”, approved as a temporary measure during the energy and cost-of-living crisis in 2022 and prolonged until the end of 2024, was extended by decree, as negotiated weeks ago with the hard-left party Podemos.
The measure entered into force on December 25, but as all decree-laws in Spain, this one also has to be ratified or rejected by Congress within 30 days from the enactment date.
According to Spanish media reports, nationalist parties from the Basque Country and Catalonia are unwilling to support the tax, not wanting to jeopardise energy investments in their regions, while other parties on the right rejected it from the start. That may leave the government without enough votes to push the decree through Congress.
The key feature of the levy remains the same — all domestic energy companies with net annual revenues exceeding EUR 1 billion (USD 1.04bn), excluding regulated power and gas businesses and earnings from abroad, pay 1.2% of turnover. The novelty is the introduction of rebates for “strategic investments”, described as “those that are essential for the ecological transition and decarbonisation and which, due to their magnitude, contribute to economic growth and employment”.
These will include projects such as production of renewable hydrogen, production of renewable fuels and gases from waste, energy storage, and projects that are in line with Spain’s national energy and climate plan and the REPowerEU plan.
The ministry for ecological transition will determine on a case-by-case basis which projects can be considered strategic investment and be eligible for a tax deduction, which cannot exceed 60%.
The government plans to conduct a study in the fourth quarter of 2025 to assess the effects of the levy and determine if it should be made permanent. That study will consider the impact on affected sectors, changes in energy product prices, and the combined effect of the levy and corporate tax.
In the tax year 2025, the government will review the levy and discuss its integration into the tax system with the regional authorities in the Basque Country and Navarre, according to the text of the decree.
Spanish associations Sedigas, Aelec and AOP, representing gas, power and petroleum companies, respectively, last week issued a joint statement saying that the decree “reduces industrial competitiveness, increases legal uncertainty in the energy sector, damages the reputation of our country in the eyes of the national and international investment community and sends out a signal that runs counter to the decarbonisation process needed in Spain and Europe”.
(EUR 1.0 = USD 1.041)
