Background information

The Government approved a set of exceptional measures to support family income, with a view to mitigating the effects of inflation and the consequent increase in prices: the "Families First" package of measures.

Related measures include Freezing of public transport prices and Adherence to the regulated tariff for the sale of natural gas .

The reduction of VAT on electricity supply is a measure included in this package. It was established by Law 19/2022 of 21 October.

Content of measure

Article 4 of Law 19/2022 of 21 October transitorily reduces the value-added tax rate applicable to electricity supplies. Thus, the intermediate VAT rate on electricity consumption will be reduced from 13% to 6% from October 2022 until December 2023.

This 6% VAT decree will apply to the first 100 kWh consumed each month or 150 kWh per month in the case of large families (households consisting of five or more people), provided that the contracted power does not exceed 6.9 kVA. With the new measure:

• Power below 3.45kVa: 6% VAT on power, 6% VAT on first 100kWh of consumption, and 23% VAT on remainder.
• Power between 4.6 and 6.9kVa: VAT of 23% on power, VAT of 6% on the first 100kWh of consumption, and VAT of 23% on the remainder.
• Power greater than 6.9kVa: 23% VAT on power, 23% VAT on consumption.

The measure has an estimated annual cost of €90 million. In 2022, it will cost up to around €22.5 million.

Use of measure

All families with power up to 6.9 kVA will benefit from this reduction in the VAT on electricity, covering 87% of consumers (in low voltage), totalling 5.3 million beneficiaries.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Does not apply to businesses	Applies to all citizens

Actors and funding

Actors	Funding
National government	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Informed	Informed
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: Peak or cross-sectoral level

Involvement

Social partners´ involvement took place in the context of the tripartite Permanent Commission of Social Concertation (CPCS), which includes: government representatives; representatives of employer confederations, i.e., the Entrepreneurial Confederation of Portugal (CIP), the Confederation of Commerce and Services of Portugal (CCP), the Confederation of Farmers of Portugal (CAP), and the Confederation of Portuguese Tourism (CTP); and the representatives of trade union confederations, i.e., the General Confederation of Portuguese Workers (CGTP) and the General Union of Workers (UGT).

Views and reactions

CGTP considers that the Families First package of measures presented by the government do not guarantee the necessary response to the growing difficulties of workers and their families. The "price increase response plan" does not solve the day-to-day difficulties that workers and pensioners are facing.

UGT also expressed some criticism. Families First is an essential and welcome package of measures, even if it can only be considered late and clearly insufficient, something that is all the more evident when we analyse the sets of measures that were gradually taken by other countries, which were earlier and more intense in their intervention.

Sources

• 06 September 2022: CGTP's reaction to Families First Package (www.cgtp.pt)
• 07 September 2022: UGT's reaction to Families First Package (www.ugt.pt)
• 08 September 2022: Families First - Portuguese Government Q&A (www.portugal.gov.pt)
• 21 October 2022: Law 19/2022 of 21 October https://dre.pt/dre/detalhe/lei/19-2022-202455960 (dre.pt)