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Energy crisis – further measures to deal with the exploding energy prices
Our latest alert (October 2022) already reported on the actions and measures, both on an EU and Belgian level, to counter the explosion of energy prices and disruptions to energy supplies, resulting from geopolitical tensions. These measures included the EU-wide temporary “solidarity contribution” (so-called “windfall tax”) of companies in the oil, gas, coal and refinery sectors and a revenue cap on companies generating low-cost electricity from wind, solar or nuclear sources.
These measures have now been implement on a national Belgian level. Our dedicated EY Energy team gives further insight on the recently implemented and proposed measures – including new support measures and incentives – in Belgium.
Windfall tax for the oil sector
The law introducing a cap on market revenues of electricity generators was published early this month and adopted by the federal parliament in the course of December 2022.
This law introduces a so-called “solidarity contribution” / windfall tax on companies within the petrochemical industry who generated “abnormally high” profits during the energy crisis. For registered petrochemical companies operating in the refining sector and with refining capacity, a contribution of 6,9 euro per ton of crude oil processed between 1 January 2022 and 31 December 2023 will have to be paid. Petroleum companies that are to be considered as ‘primary participants’: will have to pay a contribution of 7,8 euro per cubic meter of products released for consumption between 1 January 2022 and 31 December 2023.
Both contributions are provisional, minimum contributions. As soon as the annual balance sheet of the previous year is submitted, the contribution shall be calculated in accordance with Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention due to high energy prices. This Regulation foresees a tax rate of minimum 33% on the profits which are above a 20 % increase of the average of the taxable profits in the four fiscal years starting on or after 1 January 2018.
If the amount calculated according to the Regulation exceeds the amount obtained by the Belgian law (6,9 euro per ton of crude oil or 7,8 euro per cubic meter of product released for consumption), the petroleum company shall have to pay the difference.
Windfall tax for the gas sector
A single, exceptional solidarity contribution will also be imposed on natural gas transmission system operator (Fluxys). This exceptional solidarity contribution is set at €300 million and shall have to be paid to the Federal Public Service Finance no later than 16 January 2023.
However, this exceptional solidarity contribution for the operator of the natural gas transmission system, part of a broader program law, is still a draft law and thus not yet adopted nor in force. However, its approval is expected soon.
Revenue cap on inframarginal electricity producers
In the course of December 2022, also a law introducing a cap on market revenues of electricity producers was adopted by the federal parliament.
Inframarginal electricity producers produce electricity from mainly renewable and nuclear sources and provide electricity to the grid at a cost below the price level set by the more expensive “marginal” producers (producing electricity from natural gas).
This cap shall apply to market revenues produced from wind energy, solar energy, geothermal energy, hydropower without reservoir, biomass fuel, waste, nuclear energy, lignite, crude petroleum products and peat.
€130 per MWh and a maximum of €180 per MWh.
Although European legislation only requires a revenue cap of €180 per MWh of electricity produced applicable from 1 December 2022 to 30 June 2023, Belgium's implementation of this is more extensive. Not only will the Belgian revenue cap already be applicable for profits from 1 August 2022 until 30 June 2023, but the level of the cap will also be reduced to €130 per MWh for most producers. A higher cap of 180 euro / MWh is provided for plants burning biomass fuels or municipal waste. For inframarginal technologies with a specific support mechanism (such as offshore wind), a separate calculation methodology is provided with a minimum revenue cap of €130 per MWh and a maximum of €180 per MWh.
Flemish obligation to install photovoltaic solar panels on roof surfaces
A new Flemish decree of 25 November 2022, provides the Flemish Government with the legal basis to require natural or legal persons to install a certain number of photovoltaic solar panels. The decree amends the Energy Decree of 8 May 2009 in order to achieve the Flemish energy and climate objectives.
The obligation will apply to:
- owners of buildings with an annual gross electricity consumption of more than 1 GWh; and
- the government in the strict and broad sense (such as the federal, state, provincial and municipal governments, but also, for example, public companies) with an annual gross volume of electricity of more than 500 MWh.
This new obligation is currently being further developed in detail.
Amendments related to excise duties on energy products and electricity
On the 30th of November 2022, an amendment to the program law related to excise duties on energy products and electricity was published in the Belgian Official Gazette.
The most important amendment relates to the definition of “distributor”, within the area of supply of gas or electricity. It is specified who is considered a “distributor” for excise duty purposes and accordingly must be registered as such and - where relevant - must file excise declarations for its supply of gas or electricity.
According to the changed article , a person is only considered to be a “distributor” for excise duty purposes when gas or electricity is supplied to the actual user in Belgium. Therefore, trading entities which generally do not supply to the actual consumer are no longer required to register as “distributor”.
In addition to the changes particularly focusing on trading entities, also the supplier of “green” electricity may no longer qualify as a “distributor” . The registration as “distributor” gets waived to the extent that supply takes place without using a transmission or distribution network (i.e. within a closed distribution system (CDS), for example companies producing their own electricity or gas); and the electricity originates from:
- renewable energy sources (e.g. solar, wind, bio mass, etc.); or
- environmentally friendly cogeneration for which the actual user may already benefit from an excise duty exemption. Accordingly, the obligation to register for excise duty purposes as an exempt “end-user” of electricity originating from (i) renewables or (ii) environmentally friendly cogeneration plants gets waived.
Following that both the supplier of “green” electricity as well as the end-user of “green” electricity must no longer hold an excise license for respectively the distribution (“distributor” type) and exempt end-user (“end-user” type); the obligation to file excise declarations for the exempt end-use gets waived as well.
However, the situation changes when the gas or electricity is supplied outside the closed distribution network (i.e. making use of the transmission or distribution network). As from that moment, the situation should be reassessed and registration and possible excise declarations might become applicable again
Flemish Energy Support Package
In order to support healthy companies that are struggling with the rise in energy prices, the Flemish Government has developed a support mechanism to compensate part of the additional energy costs companies incur. A previous Tax Alert already provided more background to this support mechanism: New Flemish support measures in times of the energy crisis (ey.com). This incentive has recently been approved by the European Commission, meaning that eligible companies can now apply for such funding. The deadline for submitting an application related to Q4 2022 is January 16th (12am).
New GREEN investment cash grant instrument
The Flemish government has introduced a new CAPEX cash grant instrument, supporting companies that invest to:
- make the transition from fossil fuels to electricity or green energy (green or residual heat/cold, green hydrogen, blue hydrogen).
- reduce their overall energy consumption.
The subsidy percentage depends on the eco-class of the investment and the size of the company and varies from 20-40%. This percentage is applied to the amount of the additional cost of the ecological investment compared to a standard investment. Total support is limited to EUR 1 million per company for the GREEN project duration (until the end of 2024 or until the budget is exhausted).
How EY can assist you in navigating the complex energy landscape
The EY Energy Team consists of a dedicated network of fiscal and legal professionals assisting companies to navigate through the current volatile energy landscape and to identify both fiscal and non-fiscal incentives to lower their energy bill in Belgium as well as in the wider EU region.