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As of this Tuesday, December 1, the electricity bill will have new rules for the collection of VAT, that is, with the application of an intermediate rate of 13% (in mainland Portugal), instead of the normal rate of 23 .%, for the first 100 kilowatt hours (kWh) of monthly consumption. But beware: this is only valid for those who have contracted powers up to 6.9 kVA.
The simulations carried out by the Energy Services Regulatory Authority (ERSE) for various consumption profiles point to a savings of 3.9% in the bill for families with reduced consumption (160 kWh per month with a power of 3.45 kVA) and 2.4% in families with medium consumption (250 kWh per month with biweekly rates and 6.9 kVA of power).
Large families will have an increase, seeing the 13% rate applied not to 100 but to 150 kWh of monthly consumption, only that this benefit will only be applicable as of March 1, 2021. ERSE estimates that then the benefit will translate into 3.5% savings (considering monthly consumption of 250 kWh in fortnightly rates and 6.9 kVA).
But if invoices globally are to be cheaper, on the other hand, reading those same invoices can become more complicated as merchants will have to add multiple lines to the already extensive consumption tables and estimates. This is because they will have to divide the consumption into two VAT rates: 13% for the first 100 kWh of consumption and 23% for the remaining volume.
This division can also add more lines to the electricity bill if there are estimated readings and adjustments according to the actual readings.
On the other hand, it must be considered that also in the contracted power there are different types of VAT applicable if the client has a power of up to 3.45 kVA: in this case 6% VAT is charged for the fixed part of the tariff of access to the network and 23% for the rest of the network access fee.
This Monday ERSE publishes on its website a guide that explains in detail how VAT is charged on the electricity bill. These are some of the questions and answers of the energy regulator.
What VAT rates are charged anyway?
6% VAT is charged in mainland Portugal (4% in the Azores and 5% in Madeira) to the fixed component (power) of the network access rate, for consumers with a contracted power of up to 3.45 kVA, as well as the Contribution for Audiovisual (CAV).
In continental Portugal, a 13% VAT is charged (9% in the Azores and 12% in Madeira) for electricity consumption not exceeding 100 kWh, within a period of 30 days, for consumers with contracted power up to 6.9 kVA. And from March to families with five or more elements, at an electricity consumption that does not exceed 150 kWh.
And in continental Portugal, 23% VAT is charged (18% in the Azores and 22% in Madeira) for all other electricity consumption, supplies to customers with contracted power greater than or equal to 10.35 kVA and taxes and fees on electricity, namely the Special Consumption Tax (IEC) and the DGEG rate.
Who can benefit from the reduced rate of VAT on the electricity bill?
Customers with contracted power up to 3.45 kVA can benefit from the reduced VAT rate. The reduced VAT rate only applies to a part of the total amount of the invoice, that is, the fixed term (power) of the network access rates. ERSE approves the fixed component of the network access tariff.
Who can benefit from the intermediate VAT rate on the electricity bill?
Customers with contracted power up to 6.9 kVA can benefit from the intermediate VAT rate, in the part of consumption that does not exceed 100 kWh. In the case of a large family (5 or more elements), the intermediate VAT rate is applicable for the part of consumption that does not exceed 150 kWh (but only as of March 1). In both situations, the consumption thresholds consider a period of 30 days.
Who is responsible for applying VAT?
The supplier is responsible for billing the electricity consumption. The invoices must identify the different components invoiced and the respective VAT rates. The rules for applying VAT rates are the same for all consumers, whether they are still in the regulated market or if they are already in the liberalized market, which are the majority.
How can you apply for large family status?
For a large family to benefit from the application of the intermediate VAT rate for consumption that does not exceed 150 kWh, the contractor must submit a written request to his supplier in the model approved by Ordinance No. 247-A / 2020, dated October 19, accompanied by one of the following documents: IRS statement for the most recent current year that has been verified as submitted and validated (if the applicant is married or de facto married, both must be submitted IRS statements, except if you have opted for the joint contribution), or municipal ID for large families, statement from the City Council that proves the home, or last water supply bill in the name of the holder of the energy contract, indicating the application of the family water rate. The proof of large family status is valid for two years from the start date.
If I change providers, how do I prove my large family status?
In case of change, the contract holder can prove the status of a large family with the new provider, presenting the last invoice (from the previous provider) issued on the date of the change of provider. If you wish, you can make a new request in writing, accompanied by the documents indicated above.
