Belgian Windfall Tax on Electricity Producers
A windfall tax on electricity producers was enacted on 16 December 2022 to partly implement an EU-wide emergency intervention to address high energy prices. As a result, a cap on market revenues generated by electricity producers applies between 1 August 2022 and 30 June 2023.
Market revenues generated with electricity production installations using specific (inframarginal) technologies located in Belgium with a minimum installed capacity of 1 MW are in scope. Electricity generated in Belgium from, amongst others, nuclear power, solar energy, wind energy, geothermic energy, biomass fuels (excluding biomethane), and combustion of waste are all in scope of the levy.
Market revenues exceeding the cap are subject to a levy of 100% (hereafter referred to as windfall tax or levy). The levy will be used for financing measures aimed at limiting the consequences of the high electricity prices for end consumers of electricity.
Consequently, the levy does not only apply to the large energy producers-suppliers, but to any electricity producer with an installation of minimum installed capacity of 1 MW, including companies selling their excess of self-generated electricity from solar panels or wind turbines and third-party investors. Market revenues relate to any sales, irrespective of the form and through any channel, including, amongst others, retail or wholesale supply, sales on electricity exchanges (day-ahead, intra-day), sales on balancing markets or bilateral sales via corporate or merchant power purchase agreements (PPAs).
To collect the levy, a declaration is to be filed via an electronic platform, made available since 28 February 2023 on the website of the Belgian Commission for Electricity and Gas Regulation (CREG). The CREG will audit the declaration and will formulate a proposal of levy to the FPS Economy who will establish the levy and will send a payment order to the taxpayer.
The first declaration, covering the period 1 August 2022 - 31 December 2022, is to be filed by the debtor with the CREG by 30 April 2023 at the latest. Do you know the scope of the rules and what you need to do to comply?
What is the scope of the Belgian windfall tax?
On 16 December 2022, a law was enacted which partially implemented Council Regulation (EU) 2022/1854 and introduced a windfall tax on market revenues obtained from the sale of electricity generated with specific (inframarginal) technologies and injected in the grid or a direct line. The tax is levied at 100% on market revenues exceeding a cap. The cap does not apply to producers generating electricity with power-generating facilities with an installed capacity up to 1 MW. The law entered into force on 22 December 2022 following publication in the Belgian Official Gazette. An appeal for annulment of the law can be introduced at the Constitutional Court within a term of 6 months following publication of the law.
It should be noted that Regulation (EU) 2022/1854 provides for a windfall tax applicable as from 1 December 2022, whereas under the Belgian law the windfall tax applies for the period from 1 August 2022 to 30 June 2023. An extension may be adopted in the event of a prolongation of Regulation (EU) 2022/1845.
The taxable base is “surplus revenues,” consisting of the positive difference between (i) the market revenues and (ii) the cap on those market revenues, per transaction and per facility.
The electricity produced for own use will not account for the determination of the market revenues. Subsidies are also not included in market revenues.
The applicable cap is 130 EUR/MWh. A deviation from the 130 EUR/MWh cap applies in the following scenarios:
- when electricity is generated from solid and gaseous biomass fuels and the incineration of urban waste, the cap is 180 EUR/MWh.
- when the electricity production installation is benefiting from a production support scheme that varies depending upon the evolution of the electricity market price, the cap is 130 EUR/MWh or the Levelized Cost of Energy (LCOE) + 50 EUR/MWh (when the result is higher than 130 EUR/MWh but with a maximum of 180 EUR/MWh).
Market revenues above the cap are taxed at a rate of 100%.
Market revenues can be determined based on 5 presumptions reflecting common market practices. Some of these presumptions are rebuttable. When the actual market revenues deviate from the presumed market revenues calculated based on the presumptions nr. 3, 4, and 5, the taxpayer can choose to apply presumption nr. 6 and demonstrate the real market revenue for its entire production park by providing the necessary information.
Guidance on the application of the presumptions and the information to be filed with the declaration can be found in the Decision (B)2511 of the CREG of 28 February 2023 on the model of the declaration (Beslissing over het model van aangifte in te dienen door de schuldenaars van de heffing ingevoerd in het kader van het plafond op de marktinkomsten van elektriciteitsproducenten | CREG : Commissie voor de Regulering van de Elektriciteit en het Gas). This model was the subject of a public consultation procedure. The answers to the questions received during the consultation procedure also provide some guidance.
Please note that specific rules apply for energy communities.
How to comply with the Belgian windfall tax?
Once it is determined that you are subject to the levy, a (timely) registration on the platform of the CREG is required. A declaration can only be completed and filed once the registration is validated by the CREG.
The declaration model for the period 1 August 2022 - 31 December 2022 was established by the CREG on 28 February 2023. This declaration is to be filed by the taxpayer with the CREG by 30 April 2023 at the latest. The CREG audits the declaration and proposes by 30 September 2023 at the latest the amount of the levy due by the debtor to the FPS Economy. The FPS Economy establishes the amount of the levy and sends a payment order to the debtor. The payment order states the taxable base, the payable amount, the calculation method, the payment deadline, the terms of compliance and means of appeal.
The declaration model for the period 1 January 2023 - 30 June 2023 must be established by the CREG by 7 July 2023 at the latest. This declaration is to be filed by 7 September 2023 at the latest. The CREG audits the declaration and proposes by 31 December 2023 at the latest the amount of the levy due by the taxpayer to the FPS Economy, which sends the payment order, as explained above.
If the declaration is not filed within the due deadline, or when not all information is provided to determine the surplus of market revenues, the CREG can propose to establish the levy on an ex officio basis. In the framework of the levy, the CREG has specific investigative powers and can impose administrative fines and enforcement penalties in case of non-compliance.
The levy must be paid within the prescribed deadline. In the case of late payment of the levy, late payment interest applies, and any outstanding amount is collected by the FPS Finance in accordance with the rules of (enforced) collection of tax and non-tax debts provided in article 3 of the “Domanial” Law of 22 December 1949. This recovery procedure will have the same characteristics as the recovery procedure for unpaid VAT sums.
Any excess payment will be refunded upon request. A request for refund must be made on time (within six months of the receipt of the payment order sent by FPS Economy) with the FPS Economy.
After a timely request for refund, the legal claim for reimbursement of the levy expires after five years.
The amount of the levy is a deductible expense for income tax purposes and cannot be recharged directly or indirectly to other companies or end users.
For more information
If you would like to understand whether and how the windfall tax applies to your business, or if you have questions regarding the legal aspects of implementation of the windfall tax in Belgium, please contact your trusted KPMG advisor or:
Magali Vercammen (KPMG Advisory – Energy sector): firstname.lastname@example.org
Kris Eeckhout (KPMG Tax, Legal & Accountancy): email@example.com
Filip Soetaert (KPMG Law – Litigation): firstname.lastname@example.org
Thomas Verstraeten (KPMG Law – Energy regulatory): email@example.com