Factbox-Windfall tax mechanisms on energy companies across Europe

(Reuters) - Several governments across Europe have imposed windfall taxes on energy companies this year to reign in excess profits as energy prices have soared following Russia's invasion of Ukraine.

In the European Union, a temporary windfall tax was approved in September to curb fossil fuel companies' surplus profits made in 2022 or 2023, as well as a levy on excess revenues that low-cost power producers make from electricity costs, and a mandatory 5% cut in electricity use during peak price periods.

Here is a list of countries which have windfall tax mechanisms for energy companies or have proposals which still have to be approved.

AUSTRIA

Austria's government has applied a windfall tax of up to 40% for oil and gas firms whose profits were 20% above the average of the previous four years, until the end of 2023. Companies can, however, bring the tax rate down to 33% if they invest in renewable energy.

BULGARIA

Bulgaria's parliament approved in December a temporary windfall tax of 33% in accordance to the EU-wide agreement. The tax will apply to energy firms' profits that are 20% above the average of the four previous years.

CZECH REPUBLIC

The Czech government has approved a steep 60% windfall tax on energy firms and banks, and will also cap power firms' revenues.

The three-year tax will start from 2023, apply to profits exceeding 120% of the 2018-2021 average and comes on top of a 19% corporate tax rate.

The caps will range from 70 euros ($73.53) per megawatt hour (MWh) of electricity generated from nuclear plants to 240 euros/MWh for power production fuelled by gas from biomass. The state would then take 90% of revenue earned by firms above that cap.

The ceiling for wind, solar and hydro sources will be at 180 euros, while it will be 230 euros for lignite-fired coal plants with output up to 140 megawatts, and 170 euros for large plants.

FINLAND

Finland's government is preparing to introduce a new temporary tax on excessive profits of energy companies. The additional tax on energy profits, similar to a windfall tax, will last for a year.

FRANCE

The French parliament is debating a 2023 fiscal bill which includes a planned windfall tax that would be triggered when the price of electricity from nuclear and renewable energy production exceeds 100 euros/MWh in 2023. This level is nearly half the EU consensus price limit for the levy set at 180 euros/MWh. The French levy will likely cost debt-laden nuclear giant EDF around 5 billion euros next year.

GERMANY

The German government plans to introduce a special levy, called an "EU energy crisis contribution", to skim off 33% of windfall profits made by oil, coal and gas companies whose profits for 2022-2023 exceed by 20% or more the 2018-2021 average.

The levy would be implemented by the end of this year and could generate revenues of 1-3 billion euros.

Another levy started on Dec. 1 to skim off 90% of electricity companies' windfall profits until the end of April 2024. The levy will partly finance a cap on energy prices that will come into force in 2023.

GREECE

Greece has imposed a 90% retroactive tax on power producers' windfall profits from the wholesale electricity prices from October 2021 to June 2022 and will raise 373.5 million euros from the tax by the end of the year.

To help fund power bill subsidies, the country has also implemented since July an ex-ante cap on payments to power producers which is different for each technology to reflect their real production costs. Proceeds from that cap have exceeded 2.7 billion euros so far.

ITALY

Italy will apply a 50% one-off windfall tax next year on 2022 corporate income which is at least 10% higher than 2018-2021 average. Rome expects to raise around 2.565 billion euros from it.

The government also plans to raise an additional 1.4 billion euros in the first half of 2023 through a price cap on energy produced by plants fuelled by coal, fuel oil and renewable sources. The cap is set at 180 euros/MWh under regulation laid out by the European Commission.

THE NETHERLANDS

The Dutch government has proposed a "solidarity contribution" which would impose a 33% tax on Dutch energy companies' "excess profits" of more than 20% above the average level of 2018-2021. The government expects to raise 3.2 billion euros from it.

NORWAY

While there isn't windfall tax imposed on the country's oil and gas producers - who already pay a 78% tax rate on their profits - Norway will introduce a "high-price contribution" from electricity producers from Jan. 1.

This would translate into a 23% tax on the share of power prices exceeding 0.70 Norwegian crowns ($0.0699) per kilowatt hour, which would effectively raise the overall tax rate for the excess share to 90%. The contribution is expected to expire by the end of 2024.

POLAND

While Poland has dropped plans to slap a tax on windfall profits of utilities it has introduced a mechanism capping margins on power generation at minimum levels depending on the fuel they use. The measure includes renewable energy producers.

ROMANIA

Romanian gas producers were already subject to windfall taxes, but the coalition government started in September taxing power producers and traders' additional net income above a reference price of 450 lei ($96.44) per MWh - estimated to generate up to 1.5 billion lei per month.

The taxes pour into an energy transition fund used since Nov. 2021 to pay for a cap-and-compensation scheme meant to shield households and other consumers.

In November this year, the government decided to partially regulate its power market until March 2025 to ensure it has enough supply. As such, the cabinet will create a centralized energy acquisition mechanism, making power producers sell their available output at a regulated price of 450 lei per MWh from Jan. 2023.

SPAIN

A revised tax bill on energy companies' windfall profits passed by the lower house in a first reading at the end of November, with a 1.2% levy on utilities' sales.

The government expects it will raise 5 billion euros from the tax by 2024 when combined with a bill on Spanish banks, according to estimates by the Bank of Spain.

UNITED KINGDOM

The British government last month announced plans to increase a windfall tax on oil and gas producers, known as the Energy Profits Levy (EPL), from 25% to 35%. The tax will be expanded to electricity generators with a levy of 45%.

The two measures will take effect on from Jan. 1 until March 2028, and will raise a total of 14 billion pounds for the 2023/24 fiscal year and an estimate of 40 billion pounds ($48.82 billion) over the next six years.

This brings the total taxes on the sector to 75%, one of the highest rates in the world.

Oil and gas producers say the government should introduce a price floor for the windfall tax as some companies struggle with reduced access to funding in its current form.

($1 = 0.9520 euros)

($1 = 10.0172 Norwegian crowns)

($1 = 4.4730 zlotys)

($1 = 4.6681 lei)

($1 = 0.8194 pounds)

(Reporting by Reuters bureaux; compiled by Dina Kartit; edited by Nina Chestney)