Proposal for a Council Decision authorising Sweden to apply a reduced rate of taxation to electricity consumed by certain households and service sector companies in accordance with Article 19 of Directive 2003/96/EC (Only the Swedish text is authentic)
Date: 2005-01-05
Institutions: European Commission
Subjects: Sweden, derogation from EU law, electrical energy, energy-generating product, tax, tax exemption, tax system

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 5.1.2005 
COM(2004) 852 final 

Proposal for a 

COUNCIL DECISION 

authorising Sweden to apply a reduced rate of taxation to electricity consumed by 
certain households and service sector companies in accordance with Article 19 of 
Directive 2003/96/EC 

(Only the Swedish text is authentic) 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1. 

SUBMISSION OF REQUEST 

By  letter  of  20  August  2004,  the  Swedish  authorities  applied  to  the  Commission  for  a 
derogation allowing them to implement a reduced rate of taxation to electricity consumed by 
households and service sector companies in the north of Sweden in accordance with Article 
19  of  Directive  2003/96/EC1.  In  order  to  obtain  the  information  it  required  to  evaluate  the 
request, the Commission sent additional questions by letter dated 20 September to which the 
Swedish authorities replied on 13 October 2004.  

The Swedish energy tax on electricity was introduced in 1957. In July 1981 a reduced energy 
tax  rate  was  introduced  for  electricity  used  in  the  north  of  Sweden,  where  heating  costs  in 
average are higher than in other parts of the country. Electric heating represents about 30% of 
all heating in the household and service sectors in Sweden. 

The  differentiation,  which  has  a  specific  regional  policy  objective,  is  based  on  climate 
considerations  and  aims  at  placing  households  and  service  sector  companies  in  the  north  of 
Sweden at an equal footing with such consumers in the southern parts of the country by way 
of  reducing  the  costs  of  electricity  for  the  consumers  up  north.  The  geographical 
differentiation has been made on an objective basis of information about mean temperatures 
during those parts of the year when houses normally are heated. The electricity consumption 
needed to heat an average house in the northern parts of Sweden is about 25 % higher than in 
the  south,  which  is  due  to  a  much  colder  climate  and  thus  longer  heating  season.  The 
beneficiaries receive a reduction in the level of electricity taxation, which equals 25 % of the 
full tax rate.  

The energy tax on electricity used by households and service sector companies in the north of 
Sweden  is  presently  set  at  0,181  SEK  per  kWh  (0,020  euro)  and  at  0,241  SEK  per  kWh 
(0,026 euro)  for  such  consumption  in  other  parts  of  the  country.  The  legal  base  for  the 
measure is found in chapter 11, sections 3 and 4 of the Act of Excise Duties on Energy. 

Sweden considers that the tax-induced incentive to increase energy efficiency is maintained. 

The annual budgetary expenditure anticipated is 800 million SEK (88 million euros). 

The measure is granted in the form of a reduced energy tax rate. The effect of the reduced tax 
rate  is  given  directly,  when  the  tax  is  levied.  The  chargeable  event  occurs  at  the  time  of 
supply to the consumer by the distributor of the electricity. 

1 

OJ  L  283,  31.10.2003,  p.  51.  Directive  as  last  amended  by  Directive  2004/75/EC  (OJ  L  157, 
30.04.2004, p. 100).  

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The areas covered by the measure are:  

Regions 

Municipalities 

Norrbottens län 

Västerbottens län 

Jämtlands län 

all 

all 

all 

Västernorrlands län 

Sollefteå, Ånge, Örnsköldsvik 

Gävleborgs län 

Dalarnas län 

Värmlands län 

Ljusdal  

Malung, Mora, Orsa, Älvdalen 

Torsby 

The measure is, as all energy taxation legislation in Sweden, not time limited. 

The  Commission,  in  its  decision2  of  11  June  2003,  did  not  raise  any  objections  on  the 
regionally differentiated tax on electricity in favour of the service sector for the period 2002- 
2005 under the State aid rules. 

2. 

EVALUATION BY THE COMMISSION 

Under Article 19(1) of Directive 2003/96/EC, the Council, acting unanimously on a proposal 
from  the  Commission,  may  authorise  any  Member  State  to  introduce  further  exemptions  or 
reductions of excise duties for specific policy considerations. 

Exemptions requested under Article 19 of Directive 2003/96/EC must be examined in terms 
of their compliance with Community policies.  

The differentiation places households and service sector companies in the north of Sweden at 
an equal footing with such consumers in the southern parts of the country by way of reducing 
the costs of electricity  for  the  consumers up north. Therefore,  the  measure  has  regional and 
cohesion policy objectives.  

The reduced level of taxation on electricity for consumption in the north of Sweden (20 euros 
per  MWh)  remains  much  higher  than  the  Community  minimum  rate  set  out  in  directive 
2003/96/EC  (1  euro  per  MWh  for  non  business  use).  Furthermore,  the  tax  reduction  is 
proportionate to the extra heating costs borne by households and service sector companies in 
northern Sweden. Consequently, the Commission is of the view that this tax level insures that 
the  incentive  effect  of  taxation  to  increase  energy  efficiency  is  maintained.  The  same 

2 

Case "C42/03 (ex-NN 3/B/2001)– Sweden" (OJ C 189 of 09.08.2003, p.6). 

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conclusion  was  reached  in  the  State  aid  decision  relating  to  the  relevant  tax  reduction.  The 
Commission considered there that the beneficiaries had always to pay a significant share of 
the national tax. 

As a general principle, tax derogations must be of limited duration. Article 19(2) of Directive 
2003/96/EC sets a maximum period of 6 years for such derogations. A State aid decision was 
adopted by the Commission in the relevant case on 11 June 2003, before the entry into force 
of Directive 2003/96/EC (31 October 2003). That decision provides that the Swedish measure 
on  regional  differentiation  is  a  compatible  aid  for  a  period  ending  on  31  December  2005. 
Therefore,  the  Commission  can  only  propose  to  the  Council  to  authorize  the  measure  until 
that  date.  This  is  without  prejudice  of  a  possible  prolongation  of  the  measure  after  new 
assessments to be conducted by the Commission on State aid and fiscal rules, if the Swedish 
authorities were willing to maintain the tax reduction after 2005. 

3. 

DECISION 

The  Commission  proposes  that,  under  Article  19  of  Directive  2003/96/EC,  the  Council 
authorises Sweden to apply until 31 December 2005 a reduced rate of taxation to electricity 
consumed  by  households  and  service  sector  companies  in  certain  cities  located  in  northern 
Sweden. 

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Proposal for a 

COUNCIL DECISION 

authorising Sweden to apply a reduced rate of taxation to electricity consumed by 
certain households and service sector companies in accordance with Article 19 of 
Directive 2003/96/EC 

(Only the Swedish text is authentic) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the 
Community framework for the taxation of energy products and electricity,1 and in particular 
Article 19(1) thereof, 

Having regard to the proposal from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

By letter of 20 August 2004, the Swedish authorities applied to the Commission for a 
derogation allowing them to apply a reduced rate of taxation to electricity consumed 
by households and service sector companies in the north of Sweden pursuant to Article 
19 of Directive 2003/96/EC. 

Since  July  1981  a  reduced  energy  tax  rate  has  been  applied  in  Sweden  to  electricity 
used  in  the  northern  parts  of  the  country,  where  electricity  consumption  for  heating 
purposes is on average 25% higher than elsewhere in the country. 

By reducing the costs of electricity for households and service sector companies in the 
north of Sweden those consumers are placed on an equal footing with such consumers 
in the southern parts of the country. Therefore, the measure has regional and cohesion 
policy objectives. 

The reduced level of taxation on electricity for consumption in the north of Sweden, 
which  amounts  to  20  euros  per  MWh,  remains  much  higher  than  the  Community 
minimum  rate  set  out  in  Directive  2003/96/EC.  Furthermore,  the  tax  reduction  is 
proportionate  to  the  extra  heating  costs  borne  by  households  and  service  sector 
companies in northern Sweden. Consequently, that level of taxation should ensure that 
the incentive effect of taxation to increase energy efficiency is maintained. 

1 

OJL 283, 31.10.2003, p. 51 Directive as last amended by Directive 2004/75/EC (OJL 157, 30.04.2004, 
p. 100). 

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(5) 

(6) 

(7) 

The reduction applied for has been reviewed by the Commission and been found not to 
distort  competition  or  hinder  the  operation  of  the  internal  market  and  it  is  not 
considered  incompatible  with  Community  policy  on  the  environment,  energy  and 
transport.  

That  approach  is  in  line  with  the  position  taken  by  the  Commission  in  the  state  aid 
case C 42/20032, where no objections were raised against the state aid element of the 
tax reduction for a period ending on 31 December 2005.  

It is therefore appropriate to authorize Sweden to apply a reduced rate of taxation to 
electricity for consumption in the north of Sweden until 31 December 2005. 

HAS ADOPTED THIS DECISION: 

Article 1 

Sweden  is  authorized  to  apply  a  reduced  rate  of  taxation  to  electricity  consumed  by 
households and service sector companies situated in the municipalities listed in the Annex . 

The reduction shall be proportionate to the extra heating costs due to the northern location, in 
comparison with the rest of Sweden. 

The  reduced  rate  shall  comply  with  the  requirements  of  Directive  2003/96/EC,  and  in 
particular the minimum rates laid down in Article 10 of that Directive. 

This Decision shall expire on 31 December 2005.  

Article 2 

Article 3 

This Decision is addressed to the Kingdom of Sweden. 

Done at Brussels, 

For the Council 
The President 

2 

OJ C189, 9.8.2003, p. 6. 

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Annex 

Regions 

Municipalities 

Norrbottens län  

All municipalities 

Västerbottens län 

All municipalities 

Jämtlands län 

All municipalities 

Västernorrlands län 

Sollefteå, Ånge, Örnsköldsvik 

Gävleborgs län 

Ljusdal 

Dalarnas län 

Malung, Mora, Orsa, Älvdalen 

Värmlands län 

Torsby 

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