Irish Cabinet Approves New Windfall Profit Tax on Energy Companies
The Irish Cabinet has approved a new windfall profit tax to be applied to the revenue of energy companies.
It also proposed to introduce a temporary solidarity surcharge for companies active in fossil fuel production and refining to fund part of a multibillion-euro relief package to mitigate the increased costs of the country's cost of living crisis.
Minister for the Environment, Climate and Communications, Eamon Ryan announced the plan on 22 November 2022. Under the windfall profit tax, a cap would be placed at EUR 120 per MWh for wind and solar power; at least EUR 180 per MWh for oil-fired and coal-fired generation; and EUR 180 per MWh for other non-gas generation. Electricity generated from natural gas would not be subject to a cap. The caps would be in effect from 1 December until 30 June 2023.
However, in instances where electricity suppliers can demonstrate that revenues in excess of the cap are being passed on through lower prices to final consumers, those revenues would not be subject to the cap.
In addition, in line with the European Council Regulation (EU) 2022/1854, the government announced the introduction of the temporary solidarity contribution for 2022 and 2023 for the companies active in fossil fuel production and refining. The temporary solidarity contribution is calculated based on a company's taxable profits which are more than 20% higher than a baseline - the average taxable profits for the company for the period 2018 to 2021 without taking into account losses. Taxable profits that are more than 20% above the baseline would be subject to the temporary solidarity contribution at a rate of 75%.
Proceeds from the cap on market revenues are expected to be collected in 2023, with proceeds from the temporary solidarity contribution to be collected in 2023 and 2024.
Our Tax News Service keeps you up to date with the latest international taxation news, both in real time and via a daily email. If you would like more information on this service, please contact sales at firstname.lastname@example.org.