Inquiry into energy tax on electricity

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PwC-skatteradgivning-Lightbulb-2-solid_0001_maroonThe government investigative committee has now submitted its final report in which it presents a series of proposals for changes to the energy tax on electricity. In particular, the committee proposes that a uniform tax rate be introduced for electricity, that the tax relief in certain municipalities in northern Sweden be abolished, that the tax reliefs for certain utilisation areas be implemented, as a major rule, in the form of a tax refundand that large data centres enjoy the same favourable tax treatment of electricity as the manufacturing industry.

The changes are proposed to take effect from 1 January 2017. The final report is currently under referral.

A uniform tax rate for electricity and tax refunds

The committee believes the current scheme in which electricity suppliers charge their customers a lower tax rate based on the nature of their operations is not in accordance with EU state aid rules.. If EU state aid rules are to be complied with in the future, the rules require, according to the committee, a direct contact between the authority granting the state aid, i.e. the Swedish Tax Agency, and the recipients of the state aid.

The committee, therefore, proposes that a uniform tax rate be applied regardless of area of use and that the lower energy tax rate be implemented through a tax refund procedure whereby consumers apply for refund of tax from the Tax Agency.

To alleviate the liquidity pressure for the most electricity-intensive businesses, the committee proposes that these operations have the right to opt for voluntary tax registration. This means that they would be able to purchase electricity tax-free and report and pay tax to the Tax Agency. The committee estimates that 200-300 companies would be eligible for voluntary tax registration.

To reduce the administrative burden for businesses, as well as for the Tax Agency, the committee proposes that only that portion of the tax for each calendar year exceeding SEK 12,000 would be refundable. The committee also proposes that no changes be made to the existing refund threshold for agriculture, forestry and fisheries.

Tax relief for certain northern municipalities to be abolished

The current tax relief for electricity consumed in certain municipalities in northern Sweden constitutes a form of state aid when electricity is consumed by businesses. In the view of the committee, the tax relief is not compatible with the EU law that will become fully applicable from 1 July 2016, and this Swedish tax relief cannot, therefore, be maintained. The committee, consequently, proposes that the current tax relief system be abolished.

Reduced tax for certain large data centres

The committee was instructed to pay particular heed to the international competition that companies operating in areas such as information and communication technology are exposed to, i.e. the competitive situation for businesses operating in fields other than traditional industry.

The committee notes that the data centre industry is growing rapidly both in Sweden and internationally and is expected to have a further significant development potential. Similar to manufacturers, some companies in the industry are electricity-intensive and exposed to international competition.

The committee, therefore, proposes that large data centres enjoy the same reduced tax rate that applies to electricity consumption in manufacturing processes.

Financial effects of the committee’s proposals

The abolition of the tax reliefin certain municipalities in northern Sweden is estimated to yield SEK 644m in increased revenues annually, while the introduction of a threshold for tax refunds will increase annual revenues by SEK 566m.

A lower tax rate for data centres is expected to reduce revenues by SEK 245m, while the amended refund procedure will generate SEK 10m.

Overall, the proposed changes would increase public revenues by SEK 975m, annually.

Anders Edlund and Fredrik Jonsson

Do you have any questions on Value Added Taxes, customs and excise duties?

Anders Edlund

Anders Edlund

Anders Edlund arbetar med punktskatter på PwC:s kontor i Stockholm. Anders har tidigare erfarenhet från annan rådgivningsverksamhet och från Skatteverket.
Kontakt: 010-213 09 61, anders.edlund@pwc.com

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