With effect from 1 January 2023, the VAT rate on the supply and installation of solar panels for residential properties is 0%. This measure forms part of the tax plans for 2023, which are currently being considered by Parliament.
On and around homes
However, the 0% tariff does not apply to all cases involving the supply and installation of solar panels. It applies only to solar panels installed on or in the immediate vicinity of residential properties. This means that the 0% tariff does not apply to solar panels on or near commercial premises, public buildings or other structures.
The term ‘dwelling’ has already been defined in the context of the application of the reduced VAT rate to painting and plastering work on dwellings. This definition is, of course, also used in the context of the 0% rate for solar panels. Provided that it is sufficient for a property to be classified according to the BAG (the Basic Administration: Addresses and Buildings, which is maintained by the Land Registry) also serves as a residential property or is a holiday home, provided that the solar panels are (also) used for the purposes of that residential property.
It does not matter whether the solar panels form part of the roof covering or are installed separately on the roof. The term “immediate vicinity” means that the 0% rate may also be applied when the solar panels are installed on a shed, garage, in the garden or on an extension, provided that these form part of the property.
The 0% tariff also applies when a homeowners’ association has solar panels installed on or near homes, and to consumers who have joined together in a postcode group.
Small Business Scheme
The aim of applying the 0% rate is to ensure that private owners of solar panels no longer have to worry about VAT. They do, however, remain VAT-registered businesses because they supply energy. However, as long as their turnover from this activity does not exceed €1,800, they automatically fall under the small business scheme, meaning that the supply of energy is exempt from VAT. This registration threshold is set out in a decision.
Burden of proof
The burden of proof that the 0% rate is being applied correctly naturally rests with the suppliers and installers of the solar panels. The principle of free evidence applies here, whereby these businesses may rely on the information from the BAG. If the supplier fails to meet the burden of proof, VAT is payable at the standard rate (21%).
The 0% tariff applies to all eligible supplies and installations of solar panels on or after 1 January 2023, even if the panels were ordered before that date.