The Government has approved a VAT reduction on fuels that will have a direct impact on the price of gasoline and diesel in Spain. The measure, included within a broader economic response plan, reduces the tax from 21% to 10% and seeks to alleviate the cost that consumers are already bearing in recent weeks.
The rising cost of oil, driven by tension in the Middle East, has once again placed the price of fuel at high levels. In this context, the Executive has opted to intervene with a tax reduction which, if fully applied, will be passed on to the final price at the pumps.
The decision comes at a time of strong pressure in the energy markets. The closure of the Strait of Hormuz, through which a significant part of the world's oil transits, has shot up the price of crude.
The Brent barrel has exceeded 110 dollars, which has had an immediate effect on the cost of fuel. In Spain, the increases have already been clearly noticed
Diesel has increased by 31%, which is equivalent to about 44.8 cents per liter while gasoline has risen by 19%, around 28.2 cents per liter
This context has led the Government to activate a plan with multiple measures, among them the reduction of VAT as one of the most visible for citizens.
When the VAT reduction comes into force
The VAT reduction does not have a specific date set on the calendar, as it is included in a Royal Decree-Law.
This implies that:
- It will come into force the day after its publication in the BOE
- Its application will be immediate from that moment
- Subsequently, it must be ratified by Congress
The parliamentary vote is scheduled for March 26, a necessary step for the measure to remain in force.
How much you can save per liter
The impact of the reduction will be direct on the final price of fuel.
Estimates point to:
- A saving of between 20 and 30 cents per liter
- An average reduction of about 20 euros per tank
These figures may vary depending on the type of fuel, market evolution, and other factors that influence the price.
The fuel in Spain is heavily taxed. An important part of the price that the consumer pays corresponds to taxes, which makes any change in the VAT have an immediate effect.
By reducing this tax, the final price at the pump should adjust downwards, although it will always also depend on the evolution of oil in international markets.
The VAT reduction is part of a broader package of measures approved by the Government to face the economic impact of the energy crisis.
The plan contemplates about 80 measures and mobilizes around 5 billion euros, with the aim of containing the effect of price increases in different areas.
Although the VAT reduction can alleviate the short-term cost, market behavior will remain key.
If the price of oil continues to rise, the effect of the measure could be partially offset. On the other hand, if the market stabilizes, the decrease could consolidate in prices during the coming weeks.
