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How much will Spain's gas VAT cut save me per month?

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The Local ([email protected])
How much will Spain's gas VAT cut save me per month?
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The Spanish government's slashing of VAT on gas will lower monthly bills for most households in Spain, but how much could you save?

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Like many countries the world over, in Spain the cost of living crisis is hitting households hard. With food and fuel prices at eye-watering levels and electricity bills at an all time high, Spaniards are feeling the financial pinch of a volatile energy market and upwards inflationary pressures mean their money doesn't go as far as it used to.

In response, the Spanish government has put in place a raft of measures aimed to help Spaniards make it through these turbulent economic times, offering free train travel, cutting VAT on electricity bills, and limiting the amount by which landlords can increase rent.

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On Tuesday September 20th, the Spanish government approved the reduction of VAT on gas and other biofuel heating products from 21 percent to 5 percent in order to help reduce energy bills heading into the more energy-intensive winter months.

The measure was announced by Prime Minister Pedro Sánchez, and will come into force from October and last until December, although it could be extended into the new year.

“The government of Spain is proposing a reduction in VAT on gas from 21 to five percent,” Sánchez told Cadena SER in a radio interview on Thursday, adding that the cut “is in line with the economic policy” of his government, something he describes as “selective tax reductions for the benefit of the working middle class.”

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“We will do it now in autumn and the winter. It’s reasonable that we try to reduce the heating bills of the citizens of the country,” Sánchez said, adding that although the measure is slated for three months, “we will be open to extending it over the next year as long as this very difficult situation lasts.”

The move comes as part of a series of measures put in place by the Spanish government to try and ease the burden of the cost of living crisis, in particular the rising cost of utilities bills as the more energy intensive winter months approach.

But how much will a VAT cut on gas actually save you on your monthly bill?

Savings

Since Sánchez's announcement, households and consumer groups across the country have been crunching the numbers and trying to calculate exactly how much the VAT cut could save them.

According to estimates by two of Spain's main consumer associations in Spain, OCU and Facua, the monthly savings on bills for a normal household will be somewhere between €5 and €19 depending on the type of contract you have.

OCU estimates that an average household with heating and moderate consumption (around 9,000 kwh per year) with a cheaper rate could save as much as €227 per year, which works out to savings of around €18.9 per month.

For households getting their gas on the regulated market, the savings would be around half that amount at €103 per year, with monthly savings of €8.60 per month.

Facua estimates that a household with moderate gas consumption (around 4,800 kWh per year) would save €5 per month, while those with higher consumption (up to 9,600 kWh) would see bills reduced by €9.60 per month. 

A spokesperson for Facua described the VAT cut as "a fair and necessary measure," but added that "the impact it is going to have on the bill is interesting, but it is small."

READ MORE: Sánchez visits Germany and Scholz renews backing for Iberian gas link

It is worth noting that VAT has not been cut on butane or propane and will remain at 21 percent, but in May the Spanish government froze the price of bottles of butane, which will stay at €19.55 until at least the end of the year. Many Spanish households rely on bottled gas.

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