Austria plans, like Czech Republic, to cap electricity producers’ market revenues

The Austrian government plans to cap the market revenues of most electricity producers at between 140-180 EUR/MWh. It also plans to introduce a windfall profits tax. However, its design differs fundamentally from the Czech version, as the tax will not apply to electricity producers.

“It is true that many companies in the energy sector are now making very high profits as a result of the sharp rise in energy prices,”said Austrian Finance Minister Magnus Brunner on Friday, referring to rising gas prices and the related increase in electricity prices.

As reported by foreign news outlet Montel, the levy on market revenues will begin at 140 EUR/MWh for companies that have not invested in renewable energy sources (RES). The levy amounts to 90% of the electricity price above this threshold. If companies have invested in RES, the threshold for the levy may rise to as much as 180 EUR/MWh.

As in the Czech Republic, the cap on market revenues is to be introduced from December 2022 until the end of 2023.

Windfall profits tax

Austria also plans to introduce a windfall profits tax for companies operating in the crude oil and natural gas sectors, in line with the European Regulation. The tax will primarily affect local energy giant OMV. Unlike in the Czech Republic, the tax will not apply to electricity producers.

“Companies and permanent establishments in the Union which generate at least 75% of their turnover in the fields of crude petroleum, natural gas, coal and refinery have seen a significant increase in profits due to sudden and unforeseeable circumstances, such as Russia’s war of aggression against Ukraine, reduced energy supply and increased demand due to record high temperatures, without substantially changing their cost structure or increasing investments,” states Council Regulation 2022/1854 of 6 October 2022.

The tax is to be introduced from July 2022 to December 2023. By comparison, the Czech version will be in force between 2023 and 2025 and will additionally affect the banking sector, which is not mentioned at all in the EU Regulation. The Austrian tax rate is to be a maximum of 40% and may fall to as low as 33% if companies have invested in RES.

It is not yet clear whether this is a tax rate or a surcharge on income tax, as is the case in the Czech Republic. The Czech windfall profits tax rate (windfall profit = profit exceeding the average profit for 2018-2021 by more than 20%) is 79%. The EU Regulation allows member states to set their own rate, starting from 33%.