Holtrop S.L.P. blog

Daniel Pérez Rodriguez

www.holtropslp.com

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Today we learned that the Supreme Court has raised a question of unconstitutionality to the Constitutional Court regarding the payment of the "Impuesto sobre el Valor de la Producción de Energía Eléctrica" (Tax about the Value of Electricity Production), which applies a 7% rate to the obtained income from the sale of electricity by the producers of it, whether renewable or fossil energy.

The Supreme Court questions the environmental purpose of the tax and considers that in reality it is a pure collection tax. Therefore it decides to ask the TC, who has already dismissed some appeals of unconstitutionality, such as the one from Andalusia, although the legal arguments in that case were different (Article 9.3 of the Constitution, whereas now 31.1 is being invoked).

Now the ball is in the court of the Constitutional Court, who has to decide on the validity of the tax in a ruling that could have unpredictable consequences, since it is not at all clear, in case the tax money has to be paid back, how to perform such devolution. All we know is that whoever does not recur in the four years following to the settlement, will lose the right to recover the amounts paid in that annuity and that likely compensation to the plants will be reduced in case this tax should no longer be paid, since right now it is being computed as an operation cost.  However, if the settlements are closed, theoretically they can not be opened.

In short, it is a development that we value positively, as we have always defended the illegality of the 7% tax,  and which once again proves that the problem of the tariff deficit is not solved in a proper way. It remains to see what the TC decides and, in case of cancellation, how the decision applies.