Measures extended and adopted by Royal Decree-Law 11/2022: response to the economic and social consequences of the war in Ukraine

The Council of Ministers has approved Royal Decree-Law 11/2022, of June 25, adopting urgent measures under the National Plan to respond to the economic and social consequences of the war in Ukraine.

€200 payment for employees, the self-employed, and the unemployed.

The Royal Decree-Law includes the approval of a €200 payment for low-income earners. Specifically, the legislation provides that employees, self-employed workers, and unemployed persons registered with employment offices may receive a one-off payment of €200.

To receive this payment, beneficiaries must live in households in which the combined income received by the household members was below €14,000 in 2021 and whose net assets, excluding the main residence, do not exceed €43,196.40.

Persons who already receive the Minimum Living Income (Ingreso Mínimo Vital) or who receive pensions under the General Social Security Scheme and the special Social Security schemes or under the State Civil Servants’ Pension Scheme (Régimen de Clases Pasivas del Estado) are excluded from this payment. For these groups, the Royal Decree-Law provides for specific measures, such as the extension of the 15% increase in the Minimum Living Income and in non-contributory pensions, which entails annual increases of more than €200.

The body responsible for managing this payment, which will require a prior application by the beneficiaries, will be the Spanish Tax Agency (AEAT).

Reduction of VAT (IVA) on electricity.

The main tax development in the Royal Decree-Law approved this Saturday is the reduction of VAT on electricity from 10% to 5% until December 31, 2022.

The new VAT reduction on electricity applies on the same terms as those previously in force. That is, it applies to consumers with a contracted power of 10 kW or less, provided that the arithmetic average price on the wholesale electricity market for the month preceding that of the last day of the billing period has exceeded €45 per MWh.

This VAT reduction lowers the bills of 27.7 million households, self-employed workers, and businesses. The 5% VAT rate also applies to 72.5% of the electricity supply contracts of companies and businesses (non-domestic).

The 5% rate will also apply to severely vulnerable consumers and consumers at risk of social exclusion, regardless of the contracted power or the price of electricity.

Likewise, the Special Tax on Electricity (Impuesto Especial sobre la Electricidad), which the Government already reduced in September 2021 from a rate of 5.1% to 0.5%, will remain at this minimum rate permitted under European Union legislation until December 31, 2022.

The decree also maintains, throughout 2022, the suspension of the Tax on the Value of Electricity Production (IVPEE), a levy that taxes at 7% the revenue obtained from the sale of electricity on the wholesale market and that is passed on in the price on that market and in the final bill.

In addition, the Royal Decree-Law also extends the reduced 4% VAT rate on supplies, imports, and intra-Community acquisitions of disposable surgical masks until December 31, 2022.

Fuel rebate.

Another measure extended by the Royal Decree-Law is the extraordinary rebate of 20 cents per liter of fuel, which came into operation on April 1 and was scheduled to end on June 30, but is now extended until December 31, 2022.

Likewise, the direct aid for the gas-intensive sector is extended to other activities in this field.

Increase in the Minimum Living Income and non-contributory pensions.

The Government has approved a temporary 15% increase, for six months, in Minimum Living Income payments and in non-contributory retirement and disability pensions. This temporary increase will be in force from July 1 to December 31 of this year.

In the case of the Minimum Living Income, the increase applies to the entire payment, that is, including the child support supplement in those households that receive it.

Liquidity for businesses

The Council of Ministers has also extended for three months the special deferrals of Social Security contributions at a very low interest rate—0.5%, seven times lower than usual—for sectors particularly affected by the current economic situation:

• Companies with workers registered under the General Social Security Scheme and workers included in the Special Social Security Scheme for Self-Employed Workers who carry out their activity in the urban and road transport sector (CNAE 4931, 4932, 4939, 4941, and 4942), in respect of contributions accruing between August and October 2022, in the case of companies, and between September and November 2022, in the case of self-employed workers.

• Companies and workers included in the Special Social Security Scheme for Seafarers, in respect of contributions accruing between July and September 2022.

• Companies included in the Special System for Agricultural Employees and workers included in the Special System for Self-Employed Agricultural Workers, in respect of contributions accruing between July and September 2022, in the case of companies, and between August and October 2022, in the case of self-employed workers.

Extension of energy price reductions.

In addition, the Council of Ministers has approved the extension until year-end of several measures aimed at protecting consumers from the escalation in energy prices caused by the war in Ukraine, such as the strengthening of the electricity social discount (bono social eléctrico).

It has been decided to maintain the current extraordinary discounts under the electricity social discount for vulnerable and severely vulnerable consumers, set at 60% and 70% of the regulated tariff (PVPC), respectively, throughout 2022.

With regard to the Last Resort Tariff for natural gas (TUR), it was decided in March to maintain the 15% cap on the maximum increase in the cost of the raw material in its calculation formula for the reviews of April 1 and the upcoming July 1. This measure will now also apply to the upcoming reviews of October 1 and January 1, 2023.

Likewise, the measures making natural gas supply contracting more flexible for industry will be maintained, so that companies can adapt their contracts to their consumption patterns.

With respect to long-term fixed-price electricity contracts, the Executive extends the reduction of the windfall profits obtained by electricity companies as a result of the pass-through of gas-fired generation prices to inframarginal generation (minoración de gas). As at present, only contracts with energy cost prices below €67/MWh will be exempt.

Butane cylinder price frozen at €19.55.

One of the new consumer protection measures in the Royal Decree-Law approved by the Government is the freezing of the price of bottled liquefied petroleum gas (butane cylinders). The price of €19.55, set at the last review on May 12, will be maintained until year-end.

Suspension of evictions.

In this regard, the application of several measures introduced in the latest Royal Decree-Laws on evictions has been extended until December 31, 2022.

The measures provide for:

• The extension until December 31, 2022, of the protection measures approved for vulnerable households facing eviction proceedings concerning their main residence, through the coordinated action of the courts and the competent social services, including households affected by proceedings for removal from their main residence that do not arise from lease agreements, where there are dependent persons, victims of gender-based violence, or minors in their care.

In the latter case, the court is given the power, following a balanced and proportionate assessment of the specific case, to suspend the removal where the owners of these properties are individuals or legal entities owning more than 10 homes, requesting a report from the competent social services so that they may assess the situation of economic vulnerability and identify the measures to be applied to address that situation. In these cases, account will always be taken of the circumstances already regulated in which the suspension may never be ordered, namely:

a) Where the dwelling is the owner’s main residence or second residence.

b) Where it has occurred in a property owned by an individual or legal entity that has granted its use, under any legally valid title, to an individual who has his or her habitual domicile or duly evidenced second residence there.

c) Where entry into or occupation of the property has taken place by means of intimidation or violence against persons.

d) Where there are reasonable indications that the dwelling is being used to carry out unlawful activities.

e) Where the properties are intended for social housing and the dwelling has already been allocated to an applicant.

f) Where entry into the property took place after the entry into force of the Royal Decree-Law.

Likewise, if no housing solution is offered within the three months following the issuance of the social services report, the owners of the property will be entitled to request compensation, provided that the economic loss caused is evidenced.

• The period during which landlords and owners of homes affected by the extraordinary suspension provided for in the aforementioned Royal Decree-Law 11/2020, of March 31, may submit the application for compensation provided for in the second additional provision of Royal Decree-Law 37/2020, of December 22, on urgent measures to address situations of social and economic vulnerability in the areas of housing and transport, is extended.

That period was one month from the end of the measures’ period of validity. With the extension of these measures until December 31, 2022, the new deadline for submitting that application is set at January 31, 2023.

Measures on residential leases.

The Council of Ministers has also approved the extension of the extraordinary limit on the annual rent update in residential lease agreements, which prevents increases of more than 2%.

Under this measure, a tenant under a lease of a main residence whose rent is due to be updated because the relevant anniversary of the lease term falls between the entry into force of the Royal Decree-Law and December 31, 2022, may negotiate with the landlord the increase to be applied in that annual rent update; in the absence of agreement, the rent may not be updated above the change in the Competitiveness Guarantee Index (Índice de Garantía de Competitividad), an index currently standing at 2% which, by definition, cannot exceed that percentage.

Under the extended rules, the amount of the increase to be applied to the rent will be that set out in a new agreement between landlord and tenant; if no such new agreement is reached between the parties, the rent increase may under no circumstances exceed the aforementioned annual change in the Competitiveness Guarantee Index as of the date of the update.

Furthermore, it is still provided that, where the landlord is a large landlord (gran tenedor), the agreement to be reached between owner and tenant may not entail an increase exceeding the annual change in the Competitiveness Guarantee Index as of the date of the update, a large landlord being understood as any individual or legal entity that owns more than ten urban residential properties or a built area of more than 1,500 m² for residential use, excluding in all cases garages and storage rooms.

Reduction in the price of transport passes.

The Royal Decree-Law includes direct aid of 50% on multi-journey tickets for rail services provided by Renfe subject to Public Service Obligations (Cercanías, Media Distancia, and Avant), as well as on multi-journey tickets for state concessions of regular public road passenger transport services for general use, purchased during that period and under the same conditions.

In this regard, the Government will also finance a 30% reduction in the price of all passes and multi-journey tickets for collective public land transport services falling under regional or local competence, sold between September 1 and December 31, 2022, and whose validity falls within that period.

The aid will be granted to the Autonomous Communities (regions) and local authorities that undertake to introduce a reduction of 30%, compared with the price in force on the entry into force of the Royal Decree-Law, in the price of transport passes and multi-journey tickets, excluding return tickets, for the land transport services within their competence, for the period from September 1 to December 31, 2022, subject to the limitations established by Ministerial Order of the head of the Ministry of Transport, Mobility and Urban Agenda.

In the case of annual transport passes purchased before the entry into force of the Royal Decree-Law, the competent authority may decide whether to set up a system allowing the user to be refunded the proportional part corresponding to 30% for the four-month period.

The aid will be distributed among the Autonomous Communities and local authorities using the objective criteria of demand, supply, or population determined in the methodology to be approved by Ministerial Order of the head of the Ministry of Transport, Mobility and Urban Agenda before July 15, 2022, which will be published on the electronic office (Sede Electrónica) of the Ministry of Transport, Mobility and Urban Agenda.

The fare reduction will also apply to multi-journey tickets for rail services provided by Renfe subject to Public Service Obligations (Cercanías, Media Distancia, and Avant). In the case of services falling within the competence of the General State Administration, the measure is mandatory, as it is for state concessions of regular public road passenger transport services for general use, for multi-journey tickets, excluding return tickets, purchased in both cases between September 1 and December 31, 2022, and whose validity falls within that period. In both cases, the reduction will be 50%.

The aid is compatible and cumulative with any other subsidy or aid that may be granted to transport users for the purpose of reducing the final price of the multi-journey tickets issued by service providers.

This aid will be financed through an extraordinary appropriation (crédito extraordinario) of €221 million, and will in all cases be voluntary for the administrations managing the various services, which will have the months of July and August to carry out the technical adjustments necessary to implement the price reduction from September 1.

Sustainability of the road freight transport sector.

The Russian invasion of Ukraine has led to an extraordinary increase in fuel costs, which has a major impact on road freight transport companies.

In light of this situation, first, the Royal Decree-Law amends Law 15/2009, of November 11, on the Contract for the Carriage of Goods by Land, to establish the obligation that, in road transport contracts covering a single shipment, all invoices for services performed between July 1 and December 31, 2022, show separately the cost of the fuel required to perform the transport.

To determine the cost of fuel in this type of contract, the reference will be the average weekly price of automotive diesel, including taxes, published in the European Union’s “Oil Bulletin” for Spain.

This is an extraordinary temporary measure.

Second, a temporary amendment is approved, from the entry into force of the Royal Decree-Law until December 31, 2022, of the formulas applicable to the revision of road transport prices based on changes in fuel prices, so that they reflect the actual weight of fuel costs in companies’ cost structures, depending on the type of vehicle, in the current context, and in accordance with the data of the Road Freight Transport Cost Observatory.

Measures relating to the La Palma eruption.

The Royal Decree-Law also extends several of the support measures for the island of La Palma to address reconstruction following the eruption of the Cumbre Vieja volcano. In this area, the special deferrals established by Royal Decree-Law 20/2021 and already extended by Royal Decree-Law 2/2022 are extended; they may be requested in respect of the payment of contributions accruing between June and August 2022, in the case of companies, and between July and September 2022, in the case of self-employed workers.

In addition, the application of the measures relating to temporary layoff schemes (ERTE) based on temporary force majeure and to cessation-of-activity benefits for self-employed workers introduced or extended by Royal Decree-Law 2/2022 to help those affected by the volcanic eruption is extended for six more months, until December 31, 2022: the cessation-of-activity benefit for those who have been forced to cease their activity, the extraordinary cessation-of-activity benefit for those affected by a temporary suspension of their activity as a result of the damage caused by the eruption, and the extraordinary cessation-of-activity benefit for those whose activities have been affected as a result of the damage caused by the eruption.

Support measures for the agriculture, livestock, fisheries, and aquaculture sectors.

Finally, the legislation includes a new package of support measures for the agriculture, livestock, fisheries, and aquaculture sectors within the framework of the Royal Decree-Law adopting and extending certain measures to respond to the economic and social consequences of the war in Ukraine, to address situations of social and economic vulnerability, and for the economic and social recovery of the island of La Palma.

In the case of the agricultural and fisheries sector, these measures consist of an increase of €60 million in the aid line for taking out agricultural insurance and an increase of €12 million in the subsidies for obtaining financing for the agricultural sector, agri-food SMEs, and operators in the fisheries and aquaculture sector.

On a cross-cutting basis, the €0.20 per liter fuel discount, which benefits the public as a whole, is maintained until December 31, and State aid of up to €400,000 per beneficiary is established for gas-intensive industries, such as fertilizer producers.

In addition, on a retroactive basis, from June 24 to 30, compensation will be provided to the Spanish fleet that fishes in international waters and refuels outside Spain, which will also benefit from the compensation for the increase in fuel prices provided for under the European funds.

The European Maritime, Fisheries and Aquaculture Fund (EMFAF) allows the fisheries and aquaculture sector to be compensated for the additional costs incurred as a result of the war in Ukraine so that it can cope with the rise in costs. In addition, a simplified method for calculating the increase in costs for the sector is introduced, which will speed up the application of the compensatory measures provided for.

Support measures for the agricultural sector.

Among the measures approved, the €60 million increase in the budget allocation for subsidizing agricultural insurance stands out; this will make it possible to raise the base subsidy—that is, the subsidy received by all policyholders, depending on the option chosen at the time of contracting—by 10 percentage points.

It will apply to those lines whose contracting period begins between September 1, 2022, and August 31, 2023, which cover a full one-year period.

The State Agricultural Insurance Agency (Entidad Estatal de Seguros Agrarios, ENESA) will immediately propose the amendment of the current Combined Agricultural Insurance Plan (Plan de Seguros Agrarios Combinados), so that this increase in the subsidy can be applied to insurance lines from September 1.

This new measure will increase the Ministry’s average subsidy percentage on the total cost of the premium.

Support for the ICO-MAPA-SAECA financing lines.

Lastly, with regard to financing, the budget of the support lines established in Royal Decree-Law 4/2022, of March 15, on urgent measures to support the agricultural and fisheries sector in response to the loss of profitability and as a result of the drought, is increased.

The increase responds to the sector’s demand for these support measures, resulting from the agreement between the Ministry of Agriculture, Fisheries and Food (MAPA), the Official Credit Institute (Instituto de Crédito Oficial, ICO), and the State Agricultural Guarantee Company (Sociedad Anónima Estatal de Caución Agraria, SAECA). On May 20, the period for submitting SAECA guarantee applications opened for the two lines announced, and to date more than 2,800 aid applications have been received for an approximate amount of €100 million; as a result, in just one month, the entire appropriation available to subsidize the cost of the guarantee has been used up, as well as more than 70% of the €10 million allocated by the Ministry to subsidies on loan principal.

The budget of the ICO-MAPA-SAECA line is increased by €10 million with this extension, and the total budget now rises to €20 million, increasing the potential subsidized lending to €220 million and 4,300 beneficiaries.

This aid, aimed at agricultural holdings and operators in the fisheries and aquaculture sector, consists of a subsidy of 7% of the loan principal, up to a maximum of €10,000 per beneficiary. The subsidy rises to 10% in the case of livestock farms and economic operators in the fisheries and aquaculture sector. Loans of up to €100,000 are financed with a term of up to 15 years and grace periods of up to 3 years, depending on the term of the loan.

In addition, this extension Royal Decree-Law increases by €2 million the budget of the line subsidizing SAECA guarantees, bringing it to €4,734,380. The application period is extended until May 1, 2023. The line’s potential thus rises to €120 million in subsidized lending and 3,400 beneficiaries.