Tuesday, 05 March 2019 / Published in Electricity Tax, Excise Duties

The Spanish Electricity Tax in hands of the EU Court of Justice

In communion with the operators of the sector and professionals in the field, we expected that what happened last week would happen: the Superior Court of Justice of Valencia (SCJV) has raised a series of questions for the European Union Court of Justice (CJEU) on the possible violation of the Electricity Tax (known as IVPEE for its acronym in Spanish) and of the national law emanating from it (Law 15/2012) on the EU Directives regulating the taxation of energy products, electricity and excise duties, as well as other products of an environmental nature.

The SCJV considers that the IVPEE affects areas clearly and unequivocally disposed by the regulations issued under the EU Law, such as the environment, special taxes and the electricity sector.

In particular, the preliminary rulings, and with it, the possible violation of the IVPEE with the EU law have been raised in the absence of alignment on four legal grounds:

That, despite it is defined as a direct tax, the nature and essential elements of the IVPEE are typical of an indirect tax, that is, a tax on consumption, by taxing the electricity produced and incorporated into the electrical system to be used by others different from its producer.
That, despite having, nominally, a specific purpose, such as the environmental purpose, the IVPEE is, essentially, a tax without specific end, collection, not extra-fiscal, whose ultimate objective, and we could say unique, is the reduction of the tariff deficit, that is, purely tax collection and public budget balance.
That national producers of electricity are positively discriminated against other third-country or EU-based operators (by virtue of considering manufacture / production as a taxable event and not, importation or intra-EU acquisition).
That, due to this, there is a positive distortion of the internal market for electricity, thus violating the basic EU principle of free competition by taxing the national electricity producers exclusively, leaving the non-national producers.

Thus, the SCJV is the first court in Spain that recognizes the tax and legal grounds pleaded by the operators affected by the economic burden that the IVPEE has caused, and that questions both the genesis and the corollaries of the tax, including the recent expressly recognition content in Royal Decree Law 15/2018, of October 5, 2018, by introducing a transitory exemption from the IVPEE, considering that the IVPEE has had a negative impact on the price of electricity, underlying the invoice.

At this point, we can expect the CJEU’s admission of the preliminary ruling referred by the SCJV and, in the meantime, we recommend our clients and those taxpayers who have challenged the IVPEE, request the suspension of the procedure, insofar as pronounce the CJEU.

How can we assist you?

Salinas & Partners with more than 30 years of experience in operations related to products subject to Excise Duties and Environmental Taxes is at your disposal if you would like more information, advice or assistance in relation to the tax challenge and the procedural strategy to be followed regarding the IVPEE.