EC rules out VAT exemption on German winter gas levy

A winter gas levy for German households and businesses, aimed at helping gas importers compensate for soaring costs, cannot be exempt from value-added tax, EU Economy Commissioner Paolo Gentiloni said on Wednesday, reported dpa.

The current legal framework in the European Union for VAT rates does not allow for the exemption, Gentiloni confirmed to German Finance Minister Christian Lindner in a letter seen by dpa.

Lindner, from the pro-business Free Democrats, had asked the European Commission for an exemption from EU tax rules to suspend a VAT charge on the levy and avoid even higher gas prices for consumers.

EU law sets minimum VAT rates for all member countries and only allows a complete exemption for food and other basic needs.

In his letter, Gentiloni outlined a number of possible measures to offset the increased costs including reducing the levy to accommodate for the VAT or pay back the VAT directly to consumers.

Berlin announced on Monday that German consumers will have to pay significantly more for their gas starting in October to help gas importers who are having to buy more expensive gas from suppliers outside Russia and are suffering huge losses.

The levy is set at 2.4 cents (2.45 US cents) per kilowatt hour and is expected to cost an average household nearly €500 per year.

Adding 19% VAT to the levy would mean another roughly 0.46 cents per kilowatt hour, or €576 on average per year.