- A royal decree-law takes effect immediately, although Congress must validate it afterwards.
- The measures take relief straight to energy bills, although they do not change the underlying price.
- As in 2022, it is a temporary respite: it should be used to review contracts and consumption before it ends.
On 20 March 2026 the Council of Ministers approved a royal decree-law of more than €5 billion to deal with the rise in the cost of living caused by the war. It cut VAT on electricity from 21% to 10%, did the same for fuel and froze the price of butane. It is the kind of package approved when relief is wanted to reach pockets quickly, even though its scope is, by definition, limited in time.
It was the government’s response to the energy crisis opened a few weeks earlier. For families and companies, the immediate question was what would change in their bills and for how long, and the answer requires distinguishing between the announcement, the published rule and the real effect felt at the end of the month on the bill. That distinction is useful with any emergency measure: what is announced, what is published and what is applied do not always coincide in timing or scope.
What a royal decree-law is
A royal decree-law takes effect immediately, although Congress must validate it afterwards. It is the tool the government uses when it wants to act quickly, which is why its measures tend to be specific, temporary and with an expiry date that is worth knowing from day one. A temporary measure taken as permanent creates expectations that are later corrected with discontent.
Its content is best read in the published text and not in summaries, because the details — who benefits, from when, for how long — make the difference. And since the rule is subject to validation, its wording can change during the parliamentary process, something anyone planning over a longer horizon should not forget. In the meantime, the reasonable course is to apply the rule as published and to watch for any amendment.
The energy measures
The cut in VAT on electricity and fuel from 21% to 10%, together with the freeze on the price of butane, took the relief straight to the bills. For families and companies the effect was immediate on the invoice, although it did not change the underlying price of energy. A lower bill does not mean that energy is cheaper, only that part of the cost has stopped being passed on to the consumer for a while.
There is an important nuance. VAT is a tax that companies can, in general, deduct, so cutting it affects them less than households, which cannot recover it. For a small business or a self-employed person, what really counts is the cost of energy before tax, which was still determined by the market and by the contract signed. Anyone wanting to measure the real effect of the measure should compare their bills with and without taxes, not just the final amount.
Making use of the respite
As in 2022, the measures gave temporary breathing space. The lesson of that time still held: use the respite to review energy contracts, consumption and selling prices before the support ends. Having the accounts ready for the day the cut disappears avoids surprises. A good habit is to calculate how much the bill would rise if the cut disappeared tomorrow, and to see whether the budget could take it.
In practice, it helps to compare the current tariff with other options, to identify where consumption is concentrated and to consider simple efficiency investments. Anyone selling products or services should also check whether their prices reflect the real cost of energy or depend on a support that can be withdrawn, and talk to their adviser about cash over the coming months. Extraordinary support helps through a bad moment, but a sound plan is built on the real price of things.
Temporary support is borrowed time, not a solution.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
