The Zeeland-West Brabant District Court has ruled that a solar panel installation:
- is a single asset;
- which is depreciated over 20 years.
Solar panels in the black
We are, of course, referring to solar panels in the context of profit-making activities or under the provision scheme. In other words, solar panels that have, for example, been purchased by a private limited company (BV) or that form part of the assets of a sole trader, a general partnership (VOF) or a professional partnership.
If you invest in solar panels as a private individual, depreciation only applies if you have the panels used by your business.
For VAT purposes, you may be classified as a trader even as a private individual. The condition for this is that you supply some of the (surplus) electricity generated by your solar panels to the electricity grid. You can claim back the VAT paid on the purchase of the panels from the tax authorities. If you then apply for exemption from administrative obligations, you will no longer be liable for VAT.
One asset
Solar panels alone aren’t enough. To make the electricity generated by the panels usable, you also need inverters. Together, the panels and the inverters form a single piece of equipment: the solar panel system.
This is important because the inverters wear out much sooner than the solar panels.
Depreciation period
The party concerned in the case before the District Court wishes to write off the investment in the solar panel installation against a reinvestment reserve formed upon the sale of a milk quota. This is only permitted if the solar panel installation is depreciated over a maximum of 10 years.
The taxpayer and the tax authorities agree that the technical service life of the solar panels is more than 10 years. However, for the purposes of the tax depreciation period, the economic life of the asset is decisive. The interested party supports his claim that the economic life of the installation is less than 10 years with the following arguments:
- the (financial) guarantees provided by the supplier of the installation;
- the technical developments in the field of solar panels in recent years;
- the payback period for the investment.
The payback period for the investment does not indicate a shorter, but rather a longer, service life. The Court considers it plausible that the installation can continue to be operated profitably for a considerable time even after the payback period has expired. The warranty period also points to a longer economic lifespan. After all, according to the Court, it is not customary for warranties to be provided for the entire lifespan of a fixed asset.
Finally, the Court considers that, by setting the depreciation period for the solar panel installation at 20 years, the Tax and Customs Administration has taken sufficient account of the fact that the solar panels have a longer lifespan than the inverters.