The German Ministry of Finance temporarily reduced the VAT rate on natural gas to a 7% rate from 19%.
Starting on the 1st of October, a balancing and storage levy will be added together with additional 2.419 cents per kilowatt hour, and both will be subject to VAT. Specifically, it is said in the release, that the German Chancellor expects gas suppliers to pass along the temporary VAT reductions to consumers and to ease the burden as well.
What happens when VAT is reduced?
According to Scholz, the VAT reduction is a crucial step in “alleviating the immense pressure that lies on many citizens.” In the upcoming weeks, the federal government will also put together a new, socially balanced assistance package. The Federal Chancellor highlighted that the design was ultimately driven by the issue of fairness. “So that the nation maintains unity during this time.”
The reductions will begin on 1st October 2022 and continue through 31st March 2024 if the gas levies are increased.