Mareks Rubīns, Irina Pilvere


Biogas production becomes increasingly popular in Latvia. The development of the biogas industry depends on national and European Union (EU) support, as biogas production is not economically efficient without the support. In 2014 Latvia introduced a new tax – the subsidized energy tax (SET) – that influences all biogas producers in the country. A 10% tax rate is applied to incomes gained from: 1) electricity sold under the mandatory purchase obligation; 2) guaranteed payments for the electrical capacity installed in a cogeneration plant or a power plant. However, there is an opportunity to apply the reduced SET rate of 5%. This is a government support scheme that may be applied to the tax payers that meet the criteria for effective thermal energy use: the operation of biogas facilities, the production of products or their sale to a related person, thereby ensuring the operation of the enterprise. For this purpose, the biogas facility has to be equipped with meters for measuring thermal energy generated; accurate readings of the meters at the generator output have to be specified in monthly tax reports. The research analyzed the fiscal effects of the SET on biogas production enterprises and opportunities for the reduced SET rate to be applied. The reduced SET rate is paid by 29 out of 61 (28%) biogas producers listed in the Register of Subsidized Electricity Producers. The research employed analysis and synthesis, logical construction, the monographic method and statistical analysis and performed calculations. The authors assessed the situation at four biogas production enterprises that were different in terms of output capacity and inputs used. An analysis of gross profit margins allowed concluding that there were considerable differences in expected gross profit margin among various producers: from 13% to 50%, which would be able to influence their decisions to construct a biogas facility if the SET situation were known.

Keywords: biogas production, subsidized energy tax, expected profit

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