Spain has approved a substantial package of measures this Friday, designed to mitigate the economic fallout from the ongoing conflict in the Middle East. With a significant allocation of €5 billion, these provisions encompass tax reductions, discounts for vulnerable households, and direct aid targeting the most affected sectors. Crucially, the government has also given the green light to a separate decree instituting a temporary rent freeze, a policy reminiscent of those implemented during earlier periods of economic strain.
These comprehensive decrees, poised to take effect tomorrow upon their publication in the Official State Gazette (BOE), aim to provide immediate relief across various facets of the economy. The initiatives reflect a concerted effort to stabilise household finances and support businesses grappling with heightened operational costs, particularly those stemming from volatile energy prices and supply chain disruptions exacerbated by the geopolitical situation.
The measures span critical areas including energy, transport, social welfare, and housing, demonstrating a broad governmental approach to the crisis. They are intended to cushion the impact on consumers and industries alike, ensuring essential services remain accessible and affordable while fostering economic resilience.
Energy Cost Reductions
Electricity:
- A reduction in the VAT on electricity, moving from the general rate of 21% to the reduced rate of 10%.
- Temporary suspension of the 7% electricity generation tax, typically borne by utility companies.
- A cut in the special electricity tax, paid by consumers, from the current 5.11% to a minimum rate of 0.5%.
Gas:
- The VAT on natural gas, pellets, and firewood will see a reduction from 21% to 10%.
- A freeze on the maximum selling price of butane and propane.
Fuel:
- A reduction in the VAT on diesel, petrol, and hydrocarbons from 21% to 10%.
- A cut in the hydrocarbon tax to the minimum permissible under EU regulations, translating to an effective reduction of up to 30 cents per litre of fuel and approximately €20 per tank for an average car.
Support for Vulnerable Groups and Key Sectors
- Electricity Social Bonus: Enhanced discounts for vulnerable groups (42.5%) and severely vulnerable groups (57.5%) will remain in place until the year-end.
-
Thermal Social Bonus: The minimum aid for this bonus will be increased to €50.
Guaranteed supply of water and energy. - Direct aid of 20 cents per litre of professional diesel, disbursed by the Tax Agency and regional tax administrations, for transporters, farmers, livestock breeders, and fishermen. Equivalent aid will also be provided for the purchase of fertilisers.
- The National Commission for Markets and Competition (CNMC) will be granted new supervisory and sanctioning powers to rigorously investigate and penalise those who exploit aid for undue enrichment.
- An 80% subsidy on electricity transmission and distribution tolls for all electro-intensive industries, projected to save them €200 million.
- The ICO-MAPA-SAECA credit line for subsidised loans will be expanded by €300 million, facilitating access to finance for the agri-food and fishing sectors.
Electrification and Renewable Energy Initiatives
- IRPF Deductions: Tax deductions under the Personal Income Tax (IRPF) for the installation of solar panels, charging points, and heat pumps.
- New aid programmes for building climate control and streamlined processes for installing renewable energy systems.
- Reinforcement of self-consumption, extending the maximum distance between generation and consumption from 2 to 5 kilometres, and empowering local authorities to promote new modalities and energy communities.
- Increased electrical storage capacity through batteries, declaration of public utility for hydroelectric pumping, and a general boost for renewables.
- Greater legal flexibility in energy supply contracts for businesses and self-employed individuals.
- A 15% IRPF deduction for the purchase of electric and plug-in vehicles.
- Corporate Tax: Freedom of amortisation for investments in renewables that replace fossil fuel equipment. Local councils will also be enabled to offer up to a 50% reduction in IBI (property tax) for those who have installed systems for thermal or electrical use of renewable energies, alongside a bonus of up to 95% for the works and installations of these systems.
Labour Market Measures
- A prohibition on dismissals for companies receiving public aid linked to the economic effects of the Middle East conflict.
- Acceleration of the implementation of sustainable mobility plans, which will be mandatory for all companies employing over 200 people or 100 per shift, to facilitate employee commutes to the workplace.
Housing Policies
- A temporary freeze on rental prices.
- An extension of two years for rental contracts expiring between 21st March and 31st December 2027, as reported by sources from Sumar.