On 14 September 2022, the European Commission published a proposal regarding taxation of excess profits generated from business activities in the oil, gas, coal and refinery sectors. The proposal was later the subject of proceedings and political agreement on 30 September 2022 by the Energy Council. The purpose of the excess profits tax is to address the effects of the Russian invasion of Ukraine, which have led to record high prices on gas and electricity in 2022. These effects, together with other disruptions due to lower outputs of other energy sources and extreme weather conditions, have led to increasing electricity prices that are putting a lot of pressure on households as well as small and medium sized enterprises.
In short, the proposal includes:
- that Member States shall endeavour to implement measures to reduce their total monthly gross electricity consumption by 10%;
- an obligation for Member States to identify peak price hours of electricity and seek to implement measures to reduce their gross electricity consumption during the identified peak price hours by at least 5% on average per hour;
- a mandatory cap of EUR 180 per MWh of electricity produced, on market revenues obtained from the generation of electricity from certain sources with lower marginal costs, such as wind and solar energy, hydropower without reservoir, and nuclear energy; and
- a mandatory temporary solidarity contribution, in the form of a tax on excess profits generated from activities in the crude petroleum, natural gas, coal and refinery sector. The rate for calculating the temporary solidary contribution shall be at least 33% of a value calculated as the taxable profits in the fiscal year 2022 and/or the fiscal year 2023 which are above a 20% increase of the average of the taxable profits, as determined under national tax rules, in the four fiscal years starting on or after 1 January 2018.
The measures are proposed to apply from 1 December 2022 to 31 December 2023. The reduction targets of energy consumption shall apply until 31 March 2023. The mandatory cap on market revenues shall apply until 30 June 2023. The excess profits tax shall apply in addition to the regular taxes and levies applicable according to the national legislation of a Member State.
Schjødt's tax lawyers in Sweden and Norway are following the continuous development closely.