On 1 January 2025 the temporary VAT cuts introduced during the energy crisis and the bout of inflation came to an end: electricity returns to 21% and basic foods to 4%.
From 1 January 2025 Spanish consumers pay more VAT on their electricity bills and their shopping. The temporary cuts the government had approved since 2021 to cushion the rise in energy and then food prices, and which had been extended several times, came to an end.
What changes
For electricity, VAT returns to 21% on every component of the bill. In 2024 a 10% rate applied as long as the wholesale market price stayed above a threshold, a cut that is not being renewed. Consumer associations estimated that an average household pays about €5 more a month.
For food, basic products that carried the super-reduced rate, such as bread, milk, eggs, fruit, vegetables, pulses and cheese, go from 2% to 4%. Seed oils and pasta, which were at 7.5%, return to 10%. Olive oil, after the price surge of 2023 and 2024, is included permanently among basic foods at 4%.
Why now
Inflation had eased during 2024 and electricity prices had fallen, so the government decided not to extend the cuts, which carried a significant cost for public finances. The VAT increase showed up in January’s price index.
What to bear in mind
For families, the effect is small on each bill but adds up over the year. For food producers, retailers and hospitality businesses, it is worth checking that invoicing software applies the correct rate to each product, because rate changes cause frequent errors, and reviewing selling prices. Ask your adviser if you are unsure which rate applies.
Temporary tax cuts help in a crisis, but sooner or later they end.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
