The Government proposes a temporary assistance with electricity costs – Kela gets ready to implement the new benefit
According to a recent Government proposal, low-income households could be eligible for assistance with electricity expenses in early 2023. The proposed assistance with electricity costs is intended for those unable to take full advantage of the new tax credit for electricity.
The Government has submitted a proposal on a temporary assistance with electricity costs to Parliament. It is proposed that the Act will be in force for four months from the beginning of 2023. The assistance with electricity costs is intended to help low-income households pay their electricity bills at a time of sharply rising electricity prices.
First determine eligibility for tax credit for electricity
The proposed assistance with electricity costs is intended for households that are unable to take full advantage of the tax credit for electricity due to their low annual income. The tax credit is nevertheless proposed as the primary way of accessing support with electricity costs. Households could be eligible for either the tax credit or for the direct assistance with electricity costs, not both.
The tax credit and the assistance both cover electricity expenses, that is to say electricity costs, value-added tax and basic charges. Electricity transmission costs do not count towards the tax credit or the assistance and are thus not included in these calculations.
Those with electricity expenses exceeding EUR 2,000 in the period 1 January to 30 April 2023 would be eligible for the tax credit. The tax credit would amount to 60% of the electricity costs exceeding EUR 2,000. The maximum amount of tax credit for electricity for the period January to April would be EUR 2,400.
If, for example, a household’s total electricity expenses in the period January to April were to amount to EUR 4,000, the household would be able to claim 60% of the amount exceeding EUR 2,000, i.e. EUR 1,200, as tax credit. If the total amount of income tax accrued during 2023 were to remain below EUR 1,200, leaving the household unable to apply for full tax credit, this would qualify the household for assistance with electricity costs.
The Tax Administration website provides a tax percentage calculator for estimating the amount of accrued taxes.
The assistance with electricity costs would be available for the electricity costs of one dwelling only
The new assistance with electricity costs proposed by the Government will be available only to those who are unable to take full advantage of the tax credit for electricity.
According to the proposal, the assistance will be available for electricity costs incurred in a permanent dwelling for the period 1 January to 30 April 2023. The assistance will be available for the electricity costs of one dwelling only, and the dwelling must be located in Finland.
An own-liability threshold of EUR 400 per month is included in the proposal for assistance with electricity costs. The amount of the assistance would be 60% of the electricity costs exceeding the own-liability threshold. The assistance will not cover electricity transmission costs or late payment penalty fees, so they are not included in these calculations.
The maximum amount of assistance with electricity costs would be EUR 660 per month. Applicants can qualify for the maximum amount of the assistance only if their electricity expenses in excess of the own-liability threshold come to at least EUR 1,500 per month.
The assistance would not be subject to tax and it would not affect any of the applicant’s other benefits. However, applicants who have been granted social assistance for an electricity bill would generally not be able to receive assistance with electricity costs for that particular bill.
The assistance may be available from January
According to the Government proposal, approximately 100,000 households would be eligible for the assistance with electricity costs. Kela is getting ready to implement the new benefit and to prevent disruptions in people’s everyday lives and to help them cope financially during the coming winter.
“The Government’s estimate indicates that Kela will need to recruit additional staff to tackle the implementation of the new assistance with electricity costs. The details concerning this will be specified later. We are doing everything we can to ensure that applications for assistance with electricity costs are processed as quickly as possible,” says Kirsi Metsävainio, Project Manager at Kela.
“The energy crisis is a big challenge that we are all facing together, and it is important to ensure that everyone knows that support is available for different situations. At the same time it is worth keeping in mind that we all can take steps to reduce our own electricity costs by reducing our electricity consumption,” Metsävainio adds.
If Parliament passes the Act, households can begin submitting applications for assistance in January. There will be a separate application form that can be submitted in the OmaKela e-service or sent to Kela in paper form.
Households can also apply for the tax credit for electricity from January 2023.
Kela will provide more information and instructions for customers on how to apply for assistance with electricity costs as the enactment of the legislation progresses in Parliament.