The Spanish government is considering reinstating the VAT reduction on electricity due to the impact of the war.

MadridAs the hours pass, more details are emerging about the measures the Spanish government is considering to address the energy crisis stemming from the war in the Middle East. While on Thursday, Economy Minister Carlos Cuerpo hinted at specific aid for the sectors hardest hit by rising fuel prices—agriculture and road transport, among others—on Friday, the Minister for Ecological Transition, Sara Aagesen, raised the possibility of reducing the government's VAT rate in 2021, when energy prices skyrocketed. "Yes, we are also considering this measure," Aagesen told the media on Friday morning. In 2025, the VAT on electricity returned to 21%, ending the tax reductions of recent years.

The minister explained that beyond measures focused on the sectors most affected by the increase in commodity prices, such as oil and gas, and consequently, petroleum products and electricity, they are also considering implementing measures for the entire population. "We see the impact of the war on each and every citizen," she said.

Structural and short-term measures

In this regard, the package being worked on by Pedro Sánchez's government includes structural measures, as already explained, but also short-term measures, which are usually temporary. These temporary measures will include social protection, especially for the most vulnerable (the ban on cutting off basic utilities and the social electricity and heating vouchers would be reinstated). There will also be aid for professionals (these would be proposals focused on the most affected sectors) and general tax measures, which could include the reduction in electricity bills mentioned by Aagesen. And finally, anti-fraud measures. However, the pressure to approve these measures continues. Aagesen insisted that the central government is working "tirelessly" on a plan that is "sound, addresses both short-term and structural issues," but above all, that enjoys the broadest possible consensus. Beyond the business and social fabric, it's important to keep in mind that the decree approved by the Spanish government must then be ratified by Congress, and therefore the government will need the support of the parties in the lower house. In this regard, Cuerpo expressed confidence that the parties' proposals would be "reflected" in the war relief plan. The Minister of Economy again downplayed the possibility of a universal fuel subsidy, as well as any changes to the VAT on food. Finally, the Spanish government continues to remain vague about the approval date. "When the time is right," said the First Vice President and Minister of Finance, María Jesús Montero, this Friday.