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Germany temporarily lowers VAT on electricity to 7% from October to March 2024

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The German Chancellor, Olaf Scholzannounced this Thursday that his Government has decided temporarily reduce VAT on gas from 19% to 7% to alleviate the impact of rising prices for citizens and businesses.

The measure will be in force from October 1 to the end of March 2024the same period during which the price of gas will be increased by a series of extra supplements to compensate for the additional costs incurred by companies due to the reduced supply of Russian gas.

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“With this step, we offer a relief that is clearly greater than the additional burden that the supplements entail and we expect from the companies in the gas sector that they transmit this reduction in a directly proportional way to consumers,” Scholz said in a brief appearance. He also repeated the motto he has adopted in relation to the consequences of the crisis energy for citizens, “You’ll never walk alone” or “You will never walk alone” in English.

The chancellor closed his announcement by recalling that in the coming weeks he will announce a third package with relief measures for citizens and companies, which will be added to the first two that have already been agreed upon, at a cost of 30 billion of euros. “The question of justice is decisive for the country to remain united in this crisis,” she asserted.

This Monday, the gas market area coordinator in Germany, Trading Hub Europe (THE), reported that the new supplement that companies will be able to charge to transfer to customers the additional costs caused by the purchase of gas at high prices will have an amount of 2,419 cents per kilowatt/hour.

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To this rate, which will be in force as of October 1, another supplement will be added, as it has been known today, for offset additional storage costs of gas (0.059 cents) and the supplement known as “off balance”which from that date will go from 0 to 0.57 cents.

All this implies that private consumers will have to face additional payments of more than 500 euros per year in the case of multi-member families, according to German media. The Government has authorized the companies to transfer these additional costs to the consumer since otherwise, it has argued, they would be threatened by insolvency and the security of supply would be in danger.

Berlin asked the European Commission (EC) to exceptionally dispense with collecting VAT on these supplements, but after obtaining a refusal this week, the Executive led by Scholz had already announced that it would seek an alternative to avoid further increasing the burden for the end consumer. The reduced supply of Russian gas through the Nord Stream 1 pipeline has forced German importers to buy from other suppliers at much higher prices than anticipated.

Source: Lasexta

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