SPAIN’S government will slash the VAT rate from 21% to 10% on automotive fuels, electricity and natural gas in response to rising prices caused by the Iran war.

Sources have told Cadena Sur radio that a royal decree will be approved this Friday at a special meeting of the Council of Ministers and that Prime Minister Pedro Sanchez will outline details in a speech afterwards.

To tackle the rise in fuel prices, in addition to lowering VAT, the government is going to reduce the rate of the special tax on hydrocarbons, which is currently 0.379 euros per litre of diesel and 0.47269 euros per litre of petrol.

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• Spain to introduce ‘comprehensive’ package this week to counter energy price spikes caused by Iran war
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That method has been chosen in preference to the 20 cents per litre discount offered as a result of the Ukraine war in 2022.

The government will also abolish the electricity generation tax – which is 7% and paid by companies – and will lower the special electricity tax – which is 5.11% and paid by consumers.

The measures will also boost the electricity social bonus, making it 42.5% for vulnerable consumers and 57.5% for severely vulnerable consumers.

An income tax break of 15% has also been included for anybody buying an electric car.

A discount of 20 cents per litre of diesel in the special tax on hydrocarbons for transporters with access to professional diesel will also be part of the package.

The 20 cents cut will also apply to diesel for farmers as well as temporary aid per vehicle for hauliers who do not qualify for a 20 cents reduction.

Spain’s monopolies board, the CNMC, will be be empowered to collect information from fuel distributors in order to monitor prices and excess profiteering.

Another income tax break involves the improvement for home energy efficiency.

Measures will also be introduced to simplify and speed up administrative procedures for renewables as well as encouraging the deployment of storage facilities and to simplify shared self-consumption in neighbourhoods, municipalities and industrial estates

There will also be a support programme for energy cooperatives and the possibility of reserving some capacity in renewable energy auctions for municipal or community projects.

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