Recently, an Association of Electricity Suppliers submitted a binding consultation to the Dirección General de Tributos, addressing key issues related to the marketing of a ‘virtual battery’ *,  a product that allows the accumulation of surplus energy generated by self-consumption installations eligible for compensation that could not be offset by the value of the energy consumed in a given billing period.

The following is a summary of the most important points of the response:

Taxation of the product under Value Added Tax (VAT)

• Modality in which production surpluses can be compensated beyond a billing period with future consumption: Surpluses that are compensated in future periods cannot reduce the energy consumed in that period, nor will they be considered as a discount. The taxable base of energy deliveries by the supplier will not be reduced by the value of surpluses from previous billing periods, although the payment made by the consumer may be lower.

• Second modality in which the surpluses from a billing period other than the one being billed are compensated by means of a refund by the retailer for the value of said surpluses, the treatment of which will depend on the contractual conditions:

• • If the refund is articulated as a discount on the final payment made by the consumer for the energy deliveries made by the retailer in the period in which it is applied, the taxable base of these supplies will not be reduced.

• • If the refund is articulated as an actual consideration, it shall be deemed to be for consideration, and consumers shall acquire the status of a trader or business for VAT purposes.

Special Electricity Tax (IEE)

• The supply of electricity from surplus energy accumulated in the “virtual battery” and used to compensate for consumption in periods subsequent to the billing period will not be eligible for the exemption established in the LEI and will be subject to the IEE.

• In the modality in which the ‘virtual battery’ allows obtaining a refund from the retailer for the value of the surplus, it will depend on the conditions agreed upon by the parties: If the ‘refund’ is articulated as the method of calculating the amount of a discount on the final payment made by the consumer corresponding to the energy deliveries made by the retailer in the period in which it is applied, without prejudice to the fact that the taxable base of these supplies will not be reduced, the treatment of this refund or compensation will also be subject to the IEE.

The binding consultation clarifies crucial aspects regarding the taxation of  ‘virtual batteries’, a product whose development had raised doubts among suppliers of electricity given the regulatory framework governing the matter.

* In a recent report by the regulator for the supervision of the retail electricity and gas market, the Spanish National Markets and Competition Commission (CNMC), it has been proposed to the suppliers of electricity to avoid naming these products as ‘virtual batteries’.