•We study a temporary VAT reform in Belgium, which decreased the VAT rate from 21% to 6% in April 2014, followed by a VAT reinstatement at 21% in September 2015.•We estimate the VAT pass-through by a difference-in-differences approach that uses business electricity prices (not subject to VAT) as a control group.•The VAT pass-through to residential prices is complete both for the VAT cut and the successive VAT hike.•Studying the impact of the VAT reform on demand, we find a demand elasticity between −0.09 and −0.17, with a symmetric response to the VAT cut and the VAT hike.•Consumers reacted quickly to the VAT reform, raising questions about the salience of the VAT change and tax incidence. In April 2014, the Belgian government reduced the VAT rate on the electricity price from 21% to 6% to support low-income families. In September 2015, the tax cut was repealed, and the VAT rate was reinstated to 21% in the context of a change of government. This paper investigates the impact of such temporary and (plausibly) exogenous VAT reform on the Belgian electricity market. We study the pass-through of the VAT reform to electricity prices and the effect of this (exogenous) price change on electricity demand. We estimate the VAT pass-through on residential electricity prices by a difference-in-differences method, using business electricity prices (not subject to VAT) as a control group. Our findings reveal that both the tax cut and the tax hike were entirely shifted to the electricity price (100% pass-through). To assess the impact of the VAT change on demand, we perform a counterfactual demand analysis of the electricity flowing monthly over the grid at the network operator level. Exploiting VAT and non-VAT related price variations, our results show a price elasticity of residential demand for electricity between -0.09 and -0.17. Interestingly, we also find that demand reacted quickly and symmetrically to the VAT cut and the subsequent VAT hike.