EU Member States formally adopt electricity revenue cap and solidarity contribution of fossil fuel sector

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EY Global

11 Oct 2022
Subject Tax Alert
Categories Corporate Tax
Jurisdictions European Union
  • On 6 October 2022, the European Union (EU) formally adopted the new Regulation introducing emergency measures to mitigate high energy prices and the risk of supply shortages in Europe.

  • The two tax-related measures include a revenue cap on infra-marginal electricity producers and a temporary solidarity contribution over the surplus profits of companies in the crude petroleum, natural gas, coal, and refinery sectors.

  • Some EU Member States have expressed concern that the adoption of the Regulation under qualified majority voting sets a precedent for adoption of future EU tax rules.

Executive summary

On 6 October 2022, EU Member States formally adopted via written procedure a Regulation introducing emergency measures to mitigate high energy prices and the risk of supply shortages in Europe (the Regulation (pdf)). The Regulation was adopted by qualified majority voting with all Member States supporting the proposal except for Slovakia and Poland. This adoption follows a European Commission (Commission) proposal published on 14 September 2022and a provisional agreement reached on 30 September 2022.2

The Regulation includes, among others, two tax-related measures targeting companies in the energy sector that the EU considers have benefited disproportionately from the current high energy prices. These measures are:

  • A revenue cap to a maximum of €180 per MWh on infra-marginal electricity generating companies (i.e., those whose production costs are unrelated to high fossil fuel prices, such as wind, solar and nuclear producers) from 1 December 2022 to 30 June 2023.
  • An EU-wide temporary “solidarity contribution” (effectively a windfall tax) which will be levied at a rate of at least 33% over the surplus profits of companies in the crude petroleum, natural gas, coal and refinery sector which can be applied by EU Member States to fiscal years 2022 and/or 2023.

The Regulation will enter into force on the day following its publication to the Official Journal of the EU. As it is a regulation, it will be directly applicable, also without transposition into the domestic laws of EU Member States.

Detailed discussion


The wholesale price of electricity within the EU has reached sustained and unprecedentedly high levels, causing significant increases in consumer energy bills. The EU Energy Ministers held a discussion on this topic on 9 September 2022 in an extraordinary Council meeting where they agreed on a common direction for temporary emergency measures and invited the Commission to come forward with legislative proposals by mid-September.3

On 14 September 2022, the Commission proposed a Regulation including measures to address the energy situation in the EU.Also, on the same date, Commission President Ursula von der Leyen delivered the annual State of the Union speech to the European Parliament. During her speech, President von der Leyen referred to the current energy crisis in Europe and highlighted the need for solidarity.

The EU Energy Ministers held another extraordinary Council meeting on 30 September where they provisionally agreed on the Regulation and initiated the written procedure for formal adoption with a deadline of 6 October. The compromise text that they provisionally agreed on included some changes to the initial proposal by the Commission, including the possibility to apply the solidarity contribution to fiscal years 2022 and/or 2023.

Formal adoption of the Regulation and accompanying statements

On 6 October 2022, the EU Member States formally adopted (pdf) the Regulation via written procedure with 25 Member States voting in favor and 2 Member States against. The measures were politically agreed under the provisions of Article 122 of the Treaty on the Functioning of the European Union (TFEU) (emergency and solidarity) through which merely a qualified majority vote in the Council is required for adoption. Following its publication in the Official Journal of the EU, the Regulation will enter into force the next day and be directly applicable to Member States. For more information on the specifics of the tax measures included in the Regulation, see the prior EY Global Tax Alert on this topic dated 3 October 2022.5

The EU published statements by Estonia, Latvia, Poland, Croatia, Slovenia and Hungary together with the outcomes of the written procedure. These statements will be included in the summary of acts adopted by the written procedure as statements to be entered in the Council minutes:

  • Statement by Estonia: In its statement, Estonia clarified its interpretation of the rules implicating that Estonia’s already existing domestic resource tax system for users of energetic mineral resources is an equivalent measure to the solidarity contribution. It also expressed concerns on the legal basis and insisted on the use of unanimity in the future for tax matters.
  • Joint statement by Estonia and Latvia: Estonia and Latvia clarified their interpretation in relation to the distribution of surplus revenues in support of final electricity customers.
  • Statement by Poland: Poland expressed its reservations on the legal basis chosen and considers that the solidarity tax should have been adopted with unanimity. It also highlighted that the adoption of the Regulation should not preclude Member States from their right to introduce and to maintain at national level measures identical or equivalent to the ones included in the Regulation.
  • Joint statement of Croatia and Slovenia: In their statement, Croatia and Slovenia reiterated their positions that the possibility of support should be extended to all market participants.
  • Statement by Hungary: Hungary also expressed its reservations on the legal basis for the solidarity contribution and called for unanimity in adoption of fiscal measures.

Businesses potentially in scope should assess the potential tax implications of the Regulation. For the solidarity contribution specifically, EU Member States are given some leeway in implementation: for example, they may choose to apply the contribution either for the 2022 or 2023 fiscal year, or to both. This means that it is important also to monitor the responses of the various Member States to assess the impact of implementation in different jurisdictions within the EU.

While likely limited to the energy sector for now, the possible introduction of windfall taxes and other emergency levies in the EU could spark a trend that spreads to other industries. It is thus important for businesses across sectors to monitor these developments.

Although some Member States have stressed that the adoption of the Regulation under qualified majority voting should not set a precedent for the adoption of fiscal measures, the Commission and some major Member States will push for new EU tax measures to be adopted without unanimity. The adoption of the Regulation therefore marks another step in this shift to tax law making at the EU level.


For additional information with respect to this Alert, please contact the following:

EY Société d’Avocats, Paris
  •  Jean-Pierre Lieb
Ernst & Young Belastingadviseurs LLP, Rotterdam
  • Marlies de Ruiter
  • Maikel Evers
Ernst & Young Belastingadviseurs LLP, Amsterdam
  • Konstantina Tsilimigka
  • Max Velthoven
Ernst & Young LLP (United Kingdom), London
  • Ben Regan
Ernst & Young LLP (United States), Global Tax Desk Network, New York
  • Jose A. (Jano) Bustos

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.