As a contribution to the fight against greenhouse gas emissions, Spanish legislation implemented the Greenhouse Gas Fluorinated Tax (IGFEI). This tax, established by Law 16/2013, aims to correct the environmental externalities generated by these harmful gases.

In general, greenhouse gases (GHGs) allow sunlight to penetrate the atmosphere but prevent the escape of much of the infrared radiation that bounces back to Earth. This causes the greenhouse effect by heating the air.

Greenhouse gases such as hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6) have a high GWP or global warming potential. Therefore, their impact is devastating to the environment and health. Unlike other gases, fluorinated gases are of human origin and are used in the refrigeration and air conditioning industry, among others.

The introduction of fluorinated gases in Spain occurred during the 1990s as an alternative to compounds harmful to the ozone layer. Subsequently, their consumption increased until 2008, stabilizing until the implementation of IGFEI in 2013. This tax, modified in 2022, has been key to reducing emissions and promoting safe and efficient alternative technologies, establishing itself as an essential element of environmental taxation, despite some objections from the refrigeration sector.

Definition and regulation of the Greenhouse Gas Fluorinated Tax

Essentially, the Greenhouse Gas Fluorinated Tax is an indirect tax that levies the consumption in Spanish territory of specified fluorinated gases and the mixtures containing them.

As mentioned, the regulation of IGFEI underwent a modification, effective from September 1, 2022. These changes were formalized by Law 14/2022, of July 8, amending Law 19/2013, of December 9, on transparency, access to public information, and good governance, in order to regulate statistics for microenterprises, small and medium-sized enterprises (SMEs) in public procurement.

Since then, the modification of IGFEI is based on the following regulations:

Article 5 of Law 16/2013, of October 29, which establishes measures on environmental taxation and other tax and financial measures.
Royal Decree 712/2022, of August 30, which approved the Regulation of the Greenhouse Gas Fluorinated Tax.
Order HFP/826/2022, of August 30, which approves self-assessment form 587 and refund request form A23 for the tax in question. It also determines the form and procedure for processing such processes and regulates registration in the territorial registry and the accounting of stocks.

Applicability and scope of the Greenhouse Gas Fluorinated Tax

Certainly, IGFEI is applicable throughout Spain without affecting the foral tax regimes of agreement and economic convention in force in the Basque Country and the Foral Community of Navarra. It also does not affect the provisions of treaties and international agreements that are already part of the internal legal system.

In particular, the Greenhouse Gas Fluorinated Tax includes in its scope hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6) specified in Annex I of EU Regulation 517/2014, respectively.

What activities are subject to IGFEI?

Specifically, the tax burden we are analyzing falls on four specific activities: manufacturing, importing, intra-community acquisition, or irregular possession of fluorinated greenhouse gases. This applies regardless of their presentation, whether they are contained in containers or incorporated into products, equipment, or devices.

  • Manufacturing. Manufacturing is understood as the production of the gases subject to the tax. On the contrary, recycling, regeneration, or obtaining mixtures are not considered manufacturing.
  • Importing. Substances subject to the Greenhouse Gas Fluorinated Tax are considered imported when they enter the peninsular territory or the Balearic Islands from a territory that does not belong to the Customs Territory of the Union. This situation gives rise to customs clearance. This is a regime that allows the entry of goods into a country other than its destination without paying domestic taxes. Importation also includes the entry into the Canary Islands, Ceuta, and Melilla of these gases from a territory other than the Spanish one when this would or would have led to customs clearance.
  • Intra-community acquisition. As the name suggests, this condition involves the purchase of fluorinated gases by a purchaser or authorized third party domiciled in the Peninsula or the Balearic Islands in another EU Member State. Similarly, the receipt of gases by their owner in the Peninsula or the Balearic Islands, sent by them from another Member State, is considered intra-community acquisition.
  • Irregular possession. Irregular possession exists when the person who owns, markets, transports, or uses the gases subject to the tax does not prove their origin. In other words, they do not demonstrate that they manufactured, imported, or acquired them in Spanish territory or intra-community. The same condition applies to gases under customs surveillance under the EU Customs Code.

Main criticisms of the Greenhouse Gas Fluorinated Tax modification

The refrigeration sector in Spain raises significant concerns about the Greenhouse Gas Fluorinated Tax. In this regard, representatives of the industry estimate that the measure increases the costs of new refrigeration installations by 5% to 10%. Specifically, those carried out in hospitality establishments, small businesses, and domestic and commercial air conditioning systems. The impact of this increase extends to supermarkets, the food industry, logistics, refrigerated transport, appliances, and automotive, affecting sectors with a turnover exceeding 130 billion euros and employing more than 750,000 people.

At the time, the refrigeration sector considered that the modification of the tax came into effect unexpectedly, with a few months’ notice. This created difficulties for installers and manufacturers of equipment with fluorinated gases to adapt to the requirements. It also claimed that Spain was a pioneer in penalizing responsible refrigerant consumption, diverging from the European principle of “polluter pays.” Other EU countries follow the EU regulation and tax only actual emissions or exempt new equipment and installations from the tax.

Furthermore, actors in the refrigeration and HVAC sector consider it inconsistent that this “environmental” tax penalizes the positive contribution of heat pumps to the decarbonization of air conditioning systems. They also believe that it disregards the role of refrigeration in maintaining the cold chain, reducing food waste.

On the other hand, this tax ignores the “White Paper for Fiscal Reform in Spain” of 2022, where experts indicate that it should be reviewed because it taxes consumption without alternatives. They also believe that the tax works better when harmonized at the European level to reduce the risk of fraud. There is also concern about the lack of adaptation and consideration of technological and environmental realities, jeopardizing the competitiveness and efficiency of key industries.

At Intersam, we accelerate the transition to ecological refrigerants

As designers and manufacturers of industrial and commercial refrigeration and air conditioning systems, at Intersam, we have already incorporated low GWP ecological refrigerants into our equipment. This way, we anticipate the gradual reduction of production and marketing rights for HFCs proposed in the recent revision of the F-Gas Regulation. At the same time, we avoid passing on to our customers the additional cost derived from the Greenhouse Gas Fluorinated Tax.

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