Reducing the additional burden Value-added tax on gas to be reduced

In view of the high gas prices, the Federal Government decided to provide relief for citizens by lowering the value-added tax rate. Federal Chancellor Scholz announced in Berlin that in future the tax on gas consumption would be 7 rather than 19 percent as has been the case to date. This arrangement is to remain in place until March 2024.

The Federal Chancellor stressed that the Federal Government will leave nobody behind in this time of crisis.

The Federal Chancellor stressed that the Federal Government will leave nobody behind in this time of crisis. 

Photo: Federal Government/Kugler

The Federal Government plans to reduce value-added tax on gas consumption to seven percent until 31 March 2024. “With this step we are providing relief to gas customers that is far greater on the whole than the additional amount that arises due to the surcharges,” Federal Chancellor Olaf Scholz said. He continued to point out that he expects companies to fully pass on this tax reduction to consumers, and that this would be communicated clearly.

The decision was made against the background of the gas surcharge that allows for higher purchasing costs to be passed on to consumers, who will have to pay an additional 2.419 cents per kilowatt hour. A balancing and storage surcharge will also apply alongside the gas surcharge, as well as value-added tax on these surcharges.

Third relief package underway

Federal Chancellor Olaf Scholz said that the goal of lowering VAT on gas consumption temporarily was to “provide relief to gas customers that is far greater on the whole than the additional amount that arises due to the surcharges”. He added that he expects companies to fully pass on this tax reduction to consumers, and that this would be communicated clearly.

The effect of the VAT reduction:
A four-person household that consumes 20,000 kilowatt hours of gas a year will save just under 400 euros per year thanks to the reduction of VAT from 19 down to seven percent planned by the Federal Government.

Third relief package underway

Lowering VAT was an important step “towards reducing the great pressure many citizens are under”, Scholz said, adding that the Federal Government will be putting together another socially balanced relief package over the next few weeks. The Federal Chancellor stressed that fairness would be key in designing the package. “So the country stays united in this time of crisis.”

Note: The originally planned  gas surcharge was cancelled retroactively on 30 September in the same context.

An overview of the effects of the adopted relief measures is available here.