The austerity tariff for households that the government has prepared in response to skyrocketing energy prices will be reflected in legislation as an amendment to the Energy Act. Details on the provision of a contribution for energy payments are set out in the related government decree. Below, we are providing more detailed information on possible VAT implications.
The contribution will not be paid by the state directly to households but to individual electricity traders who will then reduce the amounts billed to customers. The state will pay the contribution to traders through an intermediary (OTE) where all related data will be gathered.
According to an explanatory report, the contribution should have the character of a subsidy provided from the state budget. The VAT Act generally regards price subsidies to be part of a consideration; hence, we conclude that the contribution received by traders within the austerity tariff will be subject to VAT.
According to the decree, the contribution shall primarily be used to pay the nearest advances in the current billing period. In this case, from a VAT perspective, a received contribution will be considered payment received before the date of taxable supply – for energies, usually the date of billing. Generally, payments received before the date of taxable supply give rise to the obligation to pay VAT on the date of the receipt of the payment, i.e., on the date of receiving the contribution from OTE.
The contribution can also be used to reduce an incurred debt or a future billing
Furthermore, the decree allows for the possibility to apply the contribution to the nearest regular billing (e.g., when the customer has already paid the advances), or even to reduce debt incurred before the date from which traders are to apply the contribution. It may thus be the case that on the date of receiving the contribution from OTE, the energy trader will not yet be able to determine for what purpose (an advance, future billing, or historical debt) the contribution will be allocated. This means that arguments can be found for taxing the payments received only after the allocation has been made, and only for the part of the contribution that will be used to pay the 'future' advances.
The above observation is based on information currently available; however, the financial administration has not yet provided their opinion on the taxation of the contributions. Because of the importance and complexity of the contribution, we expect the financial administration to issue an official statement soon. The procedure they will propose may not be completely identical with the general interpretation presented above. We will keep you informed about further developments in the Tax and Legal Update.