Spain Cuts Electricity Taxes — But Are Your BillsActually Going Down?

If you´ve seen headlines about Spain cutting electricity taxes, you´d be forgiven for thinking your bill is about to fall. The reality is a little more complicated — and it matters whether you´re on the right tariff.

At Compare The Mercado, we review hundreds of Spanish electricity bills for expat homeowners every month. Here´s what these changes actually mean for what you pay.

What´s Changed — and Why

On 21 March 2026, the Spanish government announced a €5 billion emergency energy package in response to rising prices caused by the conflict in the Middle East. For household electricity bills, the headline measures are:

• IVA (VAT) on electricity cut from 21% back to 10%

• The special electricity tax (IEE) cut from 5.11% to 0.5%

• The 7% generation tax paid by energy companies suspended

These are real reductions — but the reason they´ve been introduced is because wholesale energy prices have already risen sharply, and household bills are either already higher or set to increase depending on your contract type. The tax cuts are a buffer, not a bonus.

If you´re on a variable tariff linked to the wholesale market (PVPC), you´ve likely already felt price rises in recent billing periods. If you´re on a fixed-rate free-market contract, your rate is locked — but that contract will eventually expire, and the market you´re returning to is more expensive than the one you left.

What This Means for Your Actual Bill

The tax cuts will reduce what you pay — but they don´t change the underlying energy rate your supplier charges. Those two things are separate, and the energy rate is the one you can actually do something about.

To put it plainly: the government has taken the edge off rising prices. Whether your bill goes up, down, or stays flat depends on your tariff — not just the tax rate.

• PVPC (variable) customers: tax cuts partially offset recent wholesale price increases — net effect varies month to month

• Fixed-rate customers: tax cuts reduce your bill immediately — but your underlying rate may not be competitive anymore given how long ago you signed

• Customers who´ve never switched: likely overpaying on both counts

Not sure which category you fall into?

Send your bill to Compare The Mercado and we´ll tell you — for free.

The Numbers: A Quick Breakdown

For a household spending around €90/month before the changes, the combined IVA and IEE reductions could save €12–18 per month in tax. Higher-consumption homes — pools, air conditioning, underfloor heating — will see larger absolute savings.

But those savings are wiped out quickly if your energy rate is 10–15% above the best available tariff. Which, for many households in Spain who have never switched supplier, it is.

What You Should Do Now

The tax reductions apply automatically — you don´t need to contact your supplier. They should appear on your next bill.

What you should do is use this moment to check whether your tariff is actually competitive.

This is a good time to look because:

• Your next bill will look different regardless — so it's worth understanding what´s driving the numbers

• The energy market in Spain has shifted significantly in 2026 — tariffs that were good value 18 months ago may no longer be

• Switching supplier in Spain is free and straightforward — and the savings can be substantial Compare The Mercado offers a free, independent comparison of electricity tariffs for expat homeowners in Spain. Send us your bill and we´ll show you exactly where you stand — and whether switching makes sense.

Send your Spanish electricity bill to Compare The Mercado for a free, no-obligation comparison. We work in English and handle everything on your behalf.

Frequently Asked Questions

Will my electricity bill definitely go down?

Not necessarily. The tax reductions lower one part of your bill — but if your underlying energy rate has increased, or was already uncompetitive, the net effect on your total bill may be neutral or even negative. The only way to know is to compare your current tariff against whats available now.

Do I need to do anything to get the lower tax rate?

No. IVA and IEE are applied by your supplier automatically in line with government rules.

The new rates will appear on bills issued from 21 March 2026. No action is needed.

Are the tax cuts permanent?

No. They are described as temporary, in place for as long as the current energy price situation persists. The Ukraine-era reductions lasted around three years. There is no fixed end date.

How do I know if Im on a good tariff?

The honest answer is that most people dont — and most people in Spain have never

compared. Send your bill to Compare The Mercado and we give you a straight answer, in plain English, at no cost.