What does the VAT cut on electricity, gas, and fuel involve?

Among the Government's anti-crisis measures, one of the most talked about is the reduction of taxes on essential utilities. The goal is for the savings to reach consumers immediately, offsetting the rise in wholesale prices caused by the instability in the Persian Gulf.

The VAT cuts are linked to the CPI; if during April the variation of the electricity, gas, and fuel CPI did not exceed that of the same month of the previous year by more than 15% according to INE (National Statistics Institute) data, the reduction would cease to have effect starting in June. That threshold has been met in some cases, so starting June 1, 2026, we will see changes in tax rates.

VAT on electricity

Regarding electricity VAT, we have an article where we take a detailed, point-by-point look at this measure.

In short, the VAT on electricity bills was reduced from 21% to 10%. This regime applied to all contracts whose contracted power was equal to or less than 10 kW, which covered practically all households in Spain. From Endesa, we estimate that the savings could be around €8 on average each month.

The electricity CPI has not exceeded the aforementioned threshold, so starting June 1, 2026, the VAT on electricity returns to 21%.

VAT on gas

For its part, the VAT on natural gas also experienced a decrease from 21% to 10% for all consumers. Likewise, this reduction also extended to other thermal fuels of plant origin, such as briquettes, pellets derived from biomass, and firewood, to reach more alternatives for home heating.

The gas CPI has not exceeded the aforementioned threshold, so starting June 1, 2026, the VAT on natural gas, briquettes, pellets derived from biomass, and firewood returns to 21%.

VAT on gasoline and diesel

The VAT reduction for gasoline and diesel is perhaps the most anticipated measure for those who depend on a vehicle for their day-to-day life. VAT on fuels similarly dropped to 10%, an exceptional decision that, added to the reduction of taxes affecting hydrocarbons to the minimum allowed by European regulations, sought to contain the rise in the price of gasoline and diesel at service stations.

These Government aids contemplated a reduction of about 30 cts./l on average. This measure remains in force until June 30, 2026, as the fuel CPI has exceeded the aforementioned threshold.

How do the measures affect my electricity bill?

The Government has designed a strategy of  'drastic reduction in energy taxation' that can mean savings of up to 60% on taxes associated with electricity consumption:

• Reduction in VAT from 21% to 10% for those households with a contracted power of less than 10 kW (until May 31). This measure, as we mentioned, expires.

• Reduction in the general rate of the Special Electricity Tax (IEE) from 5.11269632% to 0.5% for all citizens. This measure also expires, and starting June 1, 2026, the general rate returns to 5.11269632% as a consequence of the electricity CPI not exceeding the established threshold for the measure to continue.

• Suspension of the Tax on the Value of Electrical Energy Production (IVPEE), which was at 7% (maintained until June 30). This measure did not depend on the evolution of the CPI.

• Flexibility in contracts: businesses and self-employed workers will be able to modify their contracted power at no cost until the end of 2026, adapting their expenditure to their actual activity during this period.

What measures have been approved for gas?

Natural gas is one of the supplies most sensitive to the crisis in the Middle East, having experienced peaks of 40% in a single day following the start of the conflict. Among the measures for gas, we find:

• Reduction in VAT from 21% to 10% (until May 31): applicable to natural gas bills and biomass. Which we at Endesa estimate to be an average saving of €7.5 per month. This measure, as we mentioned, expires.

• Reduction in the Hydrocarbon Tax (IH) from 0.00234 €/kWh to 0.00108 €/kWh for all gas consumers. This measure continues until June 30, 2026, as it depends on the evolution of the fuel CPI, which has exceeded the established threshold for the measure to continue.

• Cap on the price of liquefied petroleum gas (LPG):  a ceiling for the maximum retail price of products such as butane cylinders.

• Flexibility in contracts: self-employed workers and clients with an annual consumption greater than 50,000 kWh will be able to modify their flow, change their toll, and temporarily suspend the contract at no cost until the end of 2026.

How much does the price of petrol and diesel drop?

For the average citizen, the main benefit is the reduction of VAT on gasoline and diesel to 10%, as well as the adjustment of the Hydrocarbon Tax to minimum EU levels. According to official estimates, this can mean savings of up to 30 cents per liter of fuel, equivalent to about 20 euros less to fill the tank of an average car. This measure is maintained until June 30, 2026.

In addition, for the most exposed professional sectors (haulers, farmers, livestock ranchers, and fishermen), direct aid was approved to avoid a domino effect that would make the shopping basket more expensive.

Who can benefit from these measures?

• Households: all benefit from the VAT reduction on fuels until June 30. The reduced VAT on electricity and gas was in force until May 31.

• Self-employed workers and SMEs:  in addition to tax benefits, they can flexibilize their electricity and gas contracts until the end of 2026.

• Electro-intensive industry: 80% reduction in access tolls to transmission and distribution networks.

• Primary sector and transport: direct aid for the use of professional fuel to guarantee supply.

What happens to the electricity social bonus?

Protection for the most vulnerable is reinforced in this new social safety net with the extension of the extraordinary discounts of the Electricity Social Bonus (Bono Social Eléctrico) throughout 2026. The new discount percentages are:

• 42.5% for vulnerable consumers.

• 57.5% for severely vulnerable consumers.

Furthermore, it is guaranteed that there will be no cuts to basic supplies (water, electricity, and gas) for households benefiting from the social bonus until 31 December 2026.

Regarding the Thermal Social Bonus (Bono Social Térmico), the minimum aid per beneficiary has been increased to €50.

How long will these measures remain in force?

• VAT on electricity and natural gas, and Special Tax on electricity: ended on May 31, 2026, as prices moderated below the threshold set in the Royal Decree.
• VAT on fuels and Hydrocarbon Tax: in force until June 30, 2026.
• Suspension of IVPEE: in force until June 30, 2026.
• Social Bonus and prohibition of cut-offs: these social protection measures extend until December 31, 2026.
• Contract flexibility for companies: also in force until December 31, 2026.

Why have these measures been approved?

The direct cause was the extreme volatility in energy markets caused by the war in Iran and the blockade of the Strait of Hormuz. On the other hand, the Executive seeks to accelerate the energy transition to make Spain more resilient. Electrification is being promoted, investment in renewables is being streamlined, and energy storage is being boosted so that, in future crises, the country relies less on conflicts in third-party nations.

How do you know if these measures affect you?

• If you are the holder of a domestic electricity contract with power less than or equal to 10 kW, you will have seen the VAT at 10% on your bills from March to May. Starting in June, the VAT returns to 21% and the Special Tax on electricity to 5.11269632%.

• If you are the holder of a gas supply contract, the reduced VAT of 10% was also applied until May 31.

• The drop in diesel and gasoline at service stations is maintained until June 30.

• If you are self-employed, we recommend reviewing your contracted power. The possibility of changing it without penalty remains in force and is an opportunity to adjust your fixed costs during 2026.

 

What can you do to save beyond these measures?

Although the tax cuts have provided a breather, the price in the energy market remains unstable. To maximize your savings, here are practical recommendations that can make a difference:

• Adjust the climate control: keeping the heating at 21ºC in winter and the air conditioning at 26ºC in summer is sufficient and avoids excessive consumption.

• Optimize your appliances: fill washing machines and dishwashers and use 'eco' programs. Avoid phantom consumption by turning off appliances on stand-by.

• Improve insulation: small actions like putting weather stripping on doors and windows or lowering blinds at night drastically reduce heat loss.

• Choose efficiency: when it's time to replace equipment, choose those with an A energy label.

And if you want to make the most of your bill in another way: with Endesa's "Bring a Friend" (Trae un amigo) program, you will receive €50 for each person who signs a contract with us using your personal code, up to a maximum of 10 friends. That is to say, you can take home up to €500.