Electricity VAT 2026: how much is it, how is it calculated and how does it affect you?

What is electricity VAT?

A significant part of what you pay on your electricity bill consists of taxes, specifically VAT and the special tax on electricity.

In addition to the taxes that do appear on the bill, there are regulated components that are not taxes but still influence the final price of energy. These components are used to cover the costs of the electricity system, such as generation, transmission and distribution, and they form part of the price we pay for electricity.

How much is electricity VAT in 2026?

VAT stands for Value Added Tax. It is a tax on consumption that exists in many countries, including Spain. It forms the basis of the Spanish system of indirect taxation. It was introduced in 1986 and reformed in 1992 to adapt it to the European single market.

The Different VAT Rates

In Spain, VAT is divided into three types*:

• General VAT: this is a 21% tax. Most products and services fall into this category.
• Reduced VAT: 10%.
• Super-reduced VAT: 4%.

*0% and 5% are also applied to certain products and/or services.

This percentage places Spain among the European Union (EU) countries with the highest VAT on electricity consumption, second only to Hungary (27%), Denmark (25%), Croatia (25%) and Sweden (25%).

At the other end of the list are Greece (6%), the United Kingdom (5% for domestic consumers), Malta (5%), Italy (10%), Ireland (13.5%) and Luxembourg (8%). Portugal, for its part, applies a 6% VAT rate to the first 100 kWh of consumption and, beyond that threshold, increases the applicable tax to 23%.

If we look at what happens in France, we find two VAT rates: a reduced rate of 5.5% is applied to the fixed part of the bills (connection fee and subscription), while the standard rate of 20% applies to the variable part of the bills (consumption).

What has changed regarding electricity VAT in recent years (2021–2026)?

• 2021: The Government reduced electricity VAT from 21% to 10% on a temporary basis, as an emergency measure to alleviate the impact of the sharp rise in energy prices.
• 2022–2023: The VAT reduction to 10% was maintained, extended on several occasions to continue cushioning the rise in electricity bills.
• 2024: VAT remained reduced, although on a transitional basis, pending price trends and new regulatory decisions.
• 2025: From 1 January 2025, the VAT applied to electricity returned to the general rate of 21%, following the end of the extraordinary reduction measures.
• 2026: For 2026, in addition to VAT at 21%, new conditions apply to the regulated items on the electricity bill:
• Access tolls rise by around 0.7%.
• Charges increase by around 10.5%.
• Capacity payments decrease by around 5%.
• Payments to the OMIE (Iberian Energy Market Operator) and the OS (System Operator, a role performed by Red Eléctrica de España) are updated, as is the financing of the Social Bonus (subsidised rate scheme), which increases notably.
• The SRAD (Active Demand Response Service) records an average increase of 73% following the first auction of 2026.

Overall, these changes will lead to an increase in the regulated portion of the bill, depending on the individual consumer’s tariff and circumstances. For example, for an average free market 2.0TD consumer, the estimated impact is around €14 more per year before taxes*.

*This is an indicative estimate that includes neither the price of the energy consumed nor the taxes applicable to the bill.

How VAT is calculated on an electricity bill (real example)

Step 1: Tax base

The tax base of the electricity bill is calculated by adding the cost of power and the cost of the energy consumed. The costs of the regulated items are included within the power and consumption prices. This is the amount that serves as the reference for applying taxes.

Step 2: Application of electricity tax

The special tax on electricity, which is currently 5.11%, is applied first to that tax base. This tax is added to the gross amount before calculating VAT.

Step 3: Application of VAT

Once the electricity tax has been added, VAT at 21% is applied (the general rate in force since January 2025). VAT is calculated on the subtotal, i.e. it includes power, energy, access tolls, charges and electricity tax.

Step 4: Final total

The result is the total amount of the bill, which corresponds to the sum of the tax base, the electricity tax and the VAT. This is the amount that the consumer finally pays.

If the customer has contracted any additional service, the cost of the service and the VAT corresponding to that service would be added to the bill.

Which parts of the bill does VAT apply to?

Electricity VAT applies to the total of the bill.

Let's take a practical example of a domestic consumer with a monthly bill of €50 before taxes who has contracted a service with a monthly cost of €2.70 before taxes:

• Gross amount (power + energy + tolls + charges): €50
• Tax on electricity at 5.11%: €2.56
• Service: €2.70
• VAT at 21%: €11.60
• Total bill with VAT: €66.86

In this way, VAT directly increases the final cost paid by the consumer.

This calculation is indicative and may vary depending on consumption, the contracted tariff and the regulated items applicable in each case.

Can electricity VAT be reduced?

Electricity VAT is set by law and the general rate of 21% is currently applied. Electricity companies do not have the capacity to modify it, as it is a state tax.

In the past, as happened in 2021, the Government decided to temporarily lower VAT to 10% to alleviate the impact of the price rise. That reduction was an exceptional measure and depended exclusively on a political decision.

Looking ahead to 2026, VAT remains at 21% and no measure has been announced to reduce it. Only if extraordinary circumstances were to occur, such as a new sharp spike in energy prices, could the Government propose another temporary reduction.

Electricity VAT 2026 vs. Gas VAT

In 2026, both electricity and natural gas are taxed at 21% VAT, following the end of the temporary reductions applied between 2021 and 2024 to contain the impact of the energy crisis.

• Electricity: 21% VAT applies to the total of the bill, including energy consumption, regulated access tolls and charges, additional contracted services and the special tax on electricity.
• Natural gas: this is also taxed at 21%, applied to consumption and regulated costs.
• Regional exceptions: in the Canary Islands, VAT does not apply, but rather IGIC, with reduced rates: 3% on the variable gas charge and 7% on other bill items.

The impact on the bill depends on each case: for electricity it applies to all items on the bill, while for gas it directly affects consumption and regulated costs.