Changes regarding windfall tax: Law no. 357/2022

The takeaway

On 13 December 2022, Law no. 357/2022 was published regarding the approval of Government Emergency Ordinance no. 119/2022 (EOG no. 119/2022) for amending and completing Government Emergency Ordinance no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market between 1 April 2022 and 31 March 2023 (“Law no. 357/2022”). It entered into force on 16 December 2022.

In detail

Law no. 357/2022 brought a series of changes to the measures adopted by GEO no. 119/2022 regarding the contribution to the Energy Transition Fund (windfall tax) and the capping of electricity and natural gas prices for non-household customers.

We present below the main changes regarding the contribution to the windfall tax:

• The formula for calculating the contribution owed by producers has been changed. Those changes include that only electricity sales transactions with physical delivery from own production are taken into account, the deduction of expenses with imbalances is limited to 5% of the value of electricity with physical delivery from own production, and the expenses incurred on the basis of contracts with financial instruments derived from the field of energy [hedging] are included in the calculation base.

• The contribution is also paid by the partners in the financial risk insurance contracts (hedging contracts), and the contracts are to be reported to the Financial Supervision Authority and/or the National Tax Administration Agency (ANAF) within two working days as of their signing by the parties.

• Electricity producers, aggregate electricity production entities, which trade quantities of electricity and/or natural gas on the wholesale market have to withhold at source and pay the windfall tax on the revenues obtained by resident/non-resident entities from financial risk insurance contracts (hedging contracts) based on the formula: 

CTE = (Price variable el – 450) x Monthly Q,

where:

Price variable el is the variable electricity price from the hedging contract;

Q Monthly is the amount of electricity related to the settlement month of the hedging contract.

• Investors which have completed projects this year will be exempt from paying the windfall tax for production capacities put into operation after 1 April 2022 (previously, GEO no. 119/2022 provided for after the deadline of 1 September 2022).

• The provision regarding the payment of the windfall tax for electricity sales for export or intra-community deliveries has been repealed.

Source: [Law no. 357 for approving GEO no. 119/2022 for amending and completing the GEO no. 27/2022 regarding the measures applicable to final customers in the electricity and natural gas market during the period 1 April 2022 -  31 March 2023, as well as for the modification and completion of some normative acts in the area of energy, published in the Official Gazette no. 1198 dated 13 December 2022]