VAT treatment of electricity supplies via settlement agencies at social tariffs

• For electricity supplied to households at social tariffs, the legally fixed, supported price is to be used for VAT purposes, and the normal value regulation (Section 4, Paragraph 9 of the German VAT Act) does not apply as the tariff structure is not based on external motives.
• The settlement agency, acting independently and for remuneration by providing administrative services, is considered an entrepreneur under Section 2 of the German VAT Act and must invoice its services to electricity suppliers subject to VAT based on a distribution key.
• The settlement agency’s assumption of social tariff benefits constitutes a separate taxable service, and any disproportionate supplies to beneficiary households or disproportionately low supplies result in taxable remuneration between the supplier and the settlement agency. Additionally, compensation for operating expenses (Section 38 (5) ElWG) is considered a taxable fee from the settlement agency to the suppliers.

Source Leitner & Leitner

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