Note to consumer prices of energy - November 2021

By decision of the Ministry of Finance, value added tax on the supply of electricity or gas was waived if the taxable supply took place or the payment for which the tax was required was accepted in the period from 1 November 2021 to 31 December 2021. (see details in Journal of Ministry of Finance No. 34 of 20 October 2021)

According to the methodology for calculating the consumer price index (both HICP and CPI), changes in prices are reflected in the index according to the tariffs valid at the given time, including the currently applicable VAT rate. The distribution of advance payments and surcharges does not matter.

The current VAT waiver for energy for November and December is therefore understood as a change in the VAT rate from 21% to 0% and will therefore be reflected in the calculation by a corresponding decrease in the price index. It does not matter whether the VAT reduction is permanent or temporary. Other possible changes in the tax rate will be treated in the same way.

According to the indicative calculation, this temporary VAT waiver represented a reduction in the overall month-on-month increase by 1.0 percentage point, in ‘housing, water, electricity, gas and other fuels’ by 4.1 percentage point, in electricity by 17.7 percentage point, in natural gas by 18.7 percentage point. For the year-on-year index, reduction in the overall increase amounted to 1.0 percentage point, in ‘housing, water, electricity, gas and other fuels’ by 4.3 percentage point, in electricity by 18.2 percentage point and in natural gas by 19.1 percentage point. In all cases these are differences between the price index with a 0% rate VAT and a hypothetical price index with a rate of 21% VAT for November 2021.