The multi-billion-euro windfall tax for energy firms to offset the toll of inflation on vulnerable consumers approved last year by Madrid will be denounced by the association of large Spanish power companies (Aelec) before the European Commission.

The extraordinary tax measure will be applied to energy firms in 2023-24 to bring in €7 billion, including €2 billion from large energy firms each year, provided some specific conditions are met.

To date, only two companies have revealed their estimates: Repsol estimates that it will have to pay some €450 million, and Naturgy calculates that it will have to disburse approximately €300 million.

Aelec is analysing all legal arguments available to present shortly a complaint before the European Commission and/or the Court of Justice of the EU; sources told financial daily Cinco Días.

The decision, however, would have limited impact and is considered to be only a political strategy without legal consequences, and unless it is a public aid scheme, the European Commission is not obliged to respond to it.

Last week, Aelec decided to appeal before the Spanish courts against the extraordinary and temporary windfall tax.

In a statement, the association, which brings together Spain’s main electricity companies, such as Iberdrola, Endesa and EDP, described the tax as “discriminatory and unjustified”.

In Aelec´s view, the measure “penalises a key sector for promoting the necessary change in the energy model” and is incoherent from a fiscal point of view because “it taxes income that was already capped and regulated by the public administration at €67/megawatt hour (MWH)”.

The association regrets that the tax formula applied by the left-wing government is based on revenues and not on profits, as is the case at the EU level, and stressed that it generates discrimination “because only a certain number of electricity companies are eligible and others, regardless of their size, are exempted”.

The windfall tax for energy companies, which the Spanish government expects to bring in €2 billion a year – a figure that would be reduced by the exemptions introduced in the parliamentary process- is collected on unregulated income in Spain at a rate of 1.2%.

In principle, it is temporary, only for two fiscal years – the results of 2022 and 2023 are taxed, to be paid in 2023 and 2024, respectively – although the regulation provides the possibility of making it permanent.

The decision of Aelec comes only a few days after the Spanish banking employers’ association announced an appeal against the extraordinary tax on the sector, with which the Spanish progressive executive expects to collect about €3 billion in two years to help mitigate the impact of inflation.

The new tax affects all Spanish electricity, gas and oil companies with a turnover of more than €1 billion in 2019, except those whose energy activity is not their core business, as well as oil or natural gas producers, coal mining or refining companies.

Meanwhile, financial institutions whose interest and commissions exceeded €800 million in 2019, which mainly includes Spanish largest banks – Santander, BBVA, CaixaBank, Sabadell, Bankinter and Unicaja Banco – and some other institutions, will have to pay a rate of 4.8% of the sum of net income from interest and commissions.

Large Spanish banks and energy companies had until Monday to pay the first instalment.

(Fernando Heller | EuroEFE.EURACTIV.es)