Supreme Court rules on hydrocarbon tax

The SC has declared, in its judgments of July 8, 2024 (ECLI:ES:TS:2024:3993), July 22, 2024 (ECLI:ES:TS:2024:4261), and July 24, 2024 (ECLI:ES:TS:2024:4296 and ECLI:ES:TS:2024:4299), that the elimination of the exemption on hydrocarbon tax ("HT") applicable to natural gas used to produce electricity or co-generate electricity and heat under Act 15/2012, on fiscal measures for sustainable energy ("Act 15/2012") is contrary to European Union law.

For these purposes, we highlight that Act 15/2012 suppressed, with effect from January 1,  2013, the exemption on HT applicable to biogas and natural gas to be used for producing electricity in power plants, producing electricity or co-generating electricity and heat in combined power plants, or the self-consumption of electricity in the facilities where it was generated. However, later, with effect from July 1, 2018, and October 7, 2018, respectively, the mentioned exemption was reintroduced to be applicable to biogas and natural gas, to avoid the tax from being transferred to the final prices during the period the prices of the wholesale market are set.

Consequently, some operators that paid the tax—during the period when the exemption was suppressed—on the acquisition of the natural gas to be used to produce electricity and heat considered that the elimination of the exemption was contrary to European Union law, and therefore requested a refund of the HT payments made.

Now, the SC has rejected, in its judgments of July 2024, the suppression of the exemption applicable to the natural gas used to produce electricity or to co-generate electricity and heat.

The SC concluded that the referral to the environmental policy reasons for the exception to the mandatory nature of the exemption is purely formal. It rendered Act 15/2012 inapplicable due to excluding the mandatory exemption and, therefore, the mentioned exemption does apply to the natural gas that was taxed in relation to the production of electricity and heat.