Council Regulation on emergency measures
On 6 October 2022, the Council of the European Union adopted Council Regulation 2022/1854 on an emergency intervention to address high energy prices (the Regulation). Such Regulation generally has direct effect in the EU Member States. The Regulation contains several measures related to the current situation on the EU energy market. These measures are - in short - as follows.
Reduction of electricity use
The Regulation contains the obligation for the EU member states to endeavor to decrease electricity consumption with 10% in the period November 2022 until the end of March 2023, compared to those periods during the last five years. Furthermore, each EU member state is required to identify ‘peak hours’ of electricity consumption and to reduce the electricity use with at least 5% during those peak hours. While the former is therefore an obligation to endeavor, the latter is a ‘firm’ obligation.
Cap on market revenues
For the period 1 December 2022 – 30 June 2023, the Regulation introduces a cap on market revenues obtained via the sale of electricity generated via inframarginal technologies. This notably includes solar, wind, geothermal and hydropower, biomass, waste and nuclear. The cap is set at EUR 180 per MWh. The technologies covered do not include generation with the use of natural gas or coal, although member states are allowed to also introduce a separate cap for hard coal. The cap targets all market revenues of producers and intermediaries participating in electricity wholesale markets on behalf of producers, regardless of the market timeframe in which the transaction takes place and of whether the electricity is traded bilaterally or in a centralized marketplace. The proceeds of the surplus revenues resulting from the application of the cap should be used to inter alia provide financial support to final energy consumers.
The Regulation also imposes the obligation on EU member states to introduce a ‘solidarity contribution’ for companies and permanent establishments in the EU active in the oil, natural gas, coal and refinery sectors. Member states may choose to implement this solidarity levy for the full year 2022 and/or 2023. The contribution is calculated over the average fiscal profits in the four fiscal years starting after 1 January 2018, plus a 20% top-up. Any profits realized in 2022 and/or 2023 in excess of that amount are to be subject to at least a 33% contribution, although EU member states may opt to apply a higher percentage. If a EU member has already enacted equivalent national measures that are sufficiently comparable, it may choose to apply those national measures. The proceeds of the measure should be used to inter alia provide financial support to final energy consumers.
Dutch implementation of reduction obligation and price cap
At this date, no legislative proposal to implement the relevant rules for the reduction obligation and price cap has been published in the Netherlands.
Dutch implementation of solidarity contribution
On 1 November 2022, the Dutch government has published a proposal to implement the solidarity contribution within the framework as set out above. We further discuss the affected companies, base, rate and method of levy below.
Companies that are affected
Companies in scope of the proposed solidarity contribution are companies that realized at least 75% of their turnover through certain economic activities. In particular, these activities must be (related to) the production of oil and natural gas, mining activities, refining of petroleum or coke oven products as defined in EU rules.
Base of the contribution
The base for the contribution is the so-called ‘excess profit’ of the year 2022. This retro-active effect is, according to the Dutch government, amongst others justified by the special market circumstances and the compensation provided to Dutch households and small companies. The excess profit is the profit of 2022 insofar it exceeds 20% of the average profit of the four previous years (2018, 2019, 2020, and 2021), which is in accordance with the above-described Regulation. The Dutch government does not intend to levy the solidarity contribution over any (excess) profits of the year 2023, as it already plans to levy additional cijns (specific turnover tax) during 2023 and 2024.
Rate and method of levy
The rate for the solidarity contribution is 33%, which is in accordance with the EU regulation. The solidarity contribution is paid upon filing the tax return, which is ultimately 17 months after the end of the relevant financial year (i.e., 2022).
The legislative proposal will now be further discussed in parliament and may be subject to further amendments by both the government and parliament.