Spain’s temporary windfall tax on energy revenues will continue in some form beyond its expiration date of December 31. The government has committed to enshrining the tax into law to secure enough votes in Congress for its new fiscal plan.
Fiscal Plan Approval and Negotiations
The approval of the fiscal plan, which passed with 178 votes in favor and 171 against, hinged on negotiations with the hard-left party Podemos. Podemos agreed to support the plan only if the ruling Socialists promised to either create a new law taxing energy and power companies by year-end or extend the existing tax through a decree.
Amendments and Political Dynamics
Initially, the extension of the energy tax was included as an amendment in the draft fiscal package. However, it was dropped following negotiations with Catalan and Basque parties, who were concerned about the impact on major clean energy investments in their regions. In a last-minute deal with Podemos, the government secured their four votes but had to agree to reinstate the energy tax.
Details of the Windfall Tax
The windfall tax, enacted during the energy and cost-of-living crisis, imposes a 1.2% levy on energy companies’ revenues exceeding EUR 1 billion (approximately USD 1.04 billion) earned in 2022, 2023, and 2024. Notably, revenues generated abroad and those from regulated activities in Spain—such as transmission and distribution grids and power and gas retail at regulated prices—are exempt from this tax. However, the tax applies to all energy companies, including those using renewable energy and fossil fuels.
Industry Concerns
In the lead-up to the vote, major oil and power companies in Spain, including Iberdrola, Endesa, Naturgy, EDP, Repsol, TotalEnergies, BP, and Moeve (formerly Cepsa), jointly expressed concerns that extending or creating new tax burdens would jeopardize over EUR 30 billion in energy transition investments over the next three years. Both Repsol and Moeve have warned that they may halt their green hydrogen investments in Spain if the tax remains.
Future Developments
Following the approval, Podemos leader Ione Belarra announced that a multi-party committee will convene in the coming days to discuss the new energy tax law. Reports suggest that the new tax measure will include exemptions for investments in decarbonization, but Podemos insists on maintaining a minimal collection rate to ensure the tax does not become merely symbolic.
Sources
- Spain’s Government Press Release on Windfall Tax
- Podemos Official Statements
- Iberdrola Investor Relations
- Repsol Press Release on Investment Concerns
