Lithuanian parlt OKs zero VAT on heating for two seasons

VILNIUS – Lithuanian lawmakers on Thursday backed government's proposal to introduce a zero VAT rate on district heating for two more winter seasons after 111 MPs voted in favor and nine abstained.

As some MPs were concerned that the rate will apply to district heating only, Prime Minister Ingrida Smonyte pointed out that the state's electricity and gas price compensation this year is higher than any VAT rate.

"Today, the state compensation for electricity prices is higher than any existing VAT rate because the compensation makes practically a half of the real price, and 30 percent of the price set by the VERT (the State Energy Regulatory Council – BNS), which is definitely higher than any VAT rate," the prime minister told lawmakers today.

Meanwhile, the difference between the gas price paid by consumers and the market price is about four times, she said.

Finance Minister Gintare Skaiste said earlier that fuel prices remain high under the current trends, which is why it proposed compensation on district heating specifically as its prices are regulated.

According to the Finance Ministry, the state budget would lose around 54 million euros in revenue in the 2022-2023 heating season because of the VAT relief and would further lose 57 million euros in the 2023-2024 season, provided that prices remain at the same level as in the first half of 2023.

The VAT relief would be in place from October 1, 2022 and 2023 until April 30, 2023 and 2024.