Temporary exemption – Germany lowers VAT on gas

The move would generally relieve gas customers much more than they would be taxed by the state gas surcharge. Scholz expects companies to pass the tax reduction on to consumers one-on-one. “This is another step towards enlightenment.”

The background is the gas tax, which importers can use from October to pass on the increased purchasing costs to consumers as a result of the war in Ukraine. All gas users will then have to pay, both private individuals and companies – initially around 2.4 cents per kilowatt hour. The compensation is also subject to value added tax.

No full VAT exemption in the EU
The federal government actually wanted to prevent this and thus ensure that the state did not earn any money. However, under European law there is no provision for exemption from VAT. The legal framework allows for no exceptions, EU Economic Commissioner Paolo Gentiloni wrote in a letter to Finance Minister Christian Lindner. However, the federal government has the option to reduce the applicable VAT to the EU minimum rate of 5 percent.

The Traffic Light Coalition of Social Democrats, Greens and Liberals (FDP) does not opt ​​for this step. Instead, she wants to take advantage of the reduced tax rate of 7 percent. In Germany, a VAT rate of 19 percent usually applies. However, 7 percent applies to selected goods. The now announced tax reduction should apply for the period of the gas surcharge, i.e. until the end of March 2024.

Additional costs due to gas allocation
About half of all households in the Federal Republic of Germany heat with gas. According to sample calculations, the surcharge for a single-person household with an annual consumption of 5000 kilowatt-hours means an annual additional cost of about 121 euros, even without VAT. For a family household with an annual consumption of 20,000 kilowatt hours, the additional costs excluding VAT are around 484 euros per year.