Fri. Feb 23rd, 2024

Date: December 25, 2023 Time: 17:43:36

The Government of Pedro Sánchez plans to approve a Royal Decree-Law in Spain this Wednesday to extend several key measures that expire on December 31. These measures are a response to the economic consequences of the war in Ukraine and the general increase in prices, including the reduction of VAT on basic foodstuffs.

The new package of measures is expected to maintain the elimination of the 4% VAT on basic foodstuffs, such as bread, milk, cheese, eggs and more for at least six more months. This measure has been one of several implemented by the Executive in its effort to mitigate the economic impact of the current crisis, adding up to a total of 47,000 million euros mobilized to date.

VAT reduction on energy

It is not yet clear whether the VAT reduction to 5% on electricity, gas, wood and pellets will be extended beyond the end of the year. This tax measure has had a significant tax collection impact, estimated at 728 million euros.

Public and work transport

The Government is also facing the decision to extend the 30% allocation on public transport. Sánchez has announced that transportation will be free for minors, young people and the unemployed, although it has not yet been detailed how long this measure will be in force.

Labor measures in force

Until December 31, the regulations that prevent increased energy costs from being an objective cause for dismissal are maintained. Failure to comply with this rule entails the return of the aid received.

Maximum price of the butane cylinder

In addition, the maximum price of the butane cylinder has been limited to 19.55 euros, a measure in force until December 31, 2023.

End of the Iberian exception in the price of electricity

One of the most effective policies has been the ‘Iberian’ mechanism, which has decoupled the price of electricity from natural gas. However, this mechanism is scheduled to end at the end of December, following the decision of the European Commission not to extend it.


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