Exemption and Reduction of the Electricity Tax Base

Law 28/2014, of 27 November [PDF] establishes that from 1 January 2015, certain customers are entitled to an 85% reduction in the Tax Base for the Electricity Tax. It applies to the following types of customers:

• Chemical reduction and electrolytic processes.
• Mineralogical processes. Mineralogical processes are those in division 23 of Regulation (EC) No 1893/2006 of the European Parliament and of the Council of 20 December 2006, establishing the statistical classification of economic activities NACE Revision 2 and amending Council Regulation (EEC) No 3037/90 as well as certain EC Regulations on specific statistical domains Text with EEA relevance.
• Metallurgical processes. Metallurgical processes are those relating to metal production and metal preparation, as well as, within the production of metal products, the production of forgings, pressings, stamping and drawing, rolled rings and powdered ore products, and surface treatment and heat treatment of castings, heating, preservation, stress-relieving and other heat treatments.
• Industrial activities whose electricity consumption accounts for more than 50% of the cost of a product.
  To calculate this, the cost of a product is defined as the sum of total purchases of goods and services plus labour plus fixed capital consumed.
  The cost is calculated per unit as an average. The cost of electricity is defined as the real cost of electricity or the cost of electricity production, if generated in-house, including all taxes, with the exception of deductible VAT.
• Farming irrigation.
• Industrial activities whose electricity purchases or consumption account for at least five per cent of the value of production. This is defined as:
  • Electricity purchased or consumed: the real cost of the electricity acquired or consumed including all taxes with the exception of deductible VAT.
  • Production value: this consists of turnover plus changes in inventories, work in progress and finished goods.
    To calculate this, the cost of a product is defined as the sum of total purchases of goods and services plus labour plus fixed capital consumed. The cost is calculated per unit as an average.
    The cost of electricity is defined as the actual purchase value of electricity or the cost of electricity production, if generated in-house.

It also establishes that the following is exempt:

1. Electricity supplied under the framework of diplomatic and consular relations.
2. Electricity supplied by international organisations recognised as such in Spain and by the members of those organisations, within the limits and under the conditions determined in the international agreements establishing such organisations or in the headquarters agreements.
3. Electrical energy supplied to the armed forces of any state, other than Spain, which is a party to the North Atlantic Treaty or by civilian personnel in their service, or in their mess halls and canteens.
4. Electricity supplied under the framework of an agreement concluded with third countries or international organisations, provided that such an agreement is accepted or authorised with regard to exemption from value added tax.
5. Electricity consumed by the owners of electricity production facilities covered by the specific remuneration system in accordance with sectoral legislation.
6. Electricity supplied that has been generated by fuel cells.
7. Electricity consumed by facilities for the production, transport and distribution of electricity for the exclusive performance of these activities.

Also Royal Decree 1074/2014, of 19 December 2014 [PDF] and Order HAP/2489/2014, of 29 December 2014 [PDF] establish that the beneficiaries of the exemptions and reductions set out in Law 28/2014 must apply for registration in the territorial register of the Special Tax Management Office of the State Tax Administration Agency corresponding to the site of the business, or in the Department of Special Taxes of the appropriate Provincial Council if located in the Basque Country or in the Government of Navarre State Treasury or Provincial Councils.

Once all the formalities are complete, the Tax Administration Agency will issue a Registration Card stating, for each installation, the Universal Supply Point or CUPS, the date of application, the Electricity Identification Code (EIC), the details of the owner of the installation and, if appropriate, the percentage of the electricity to use eligible for the tax break.