Zero Vat Solar Panels – A Win for Residential Retrofitting Projects

In a move that aims to promote renewable energy and encourage energy-conscious behaviour, the Irish government has introduced a significant change in VAT rates for photovoltaic solar systems. Starting from May 1st, 2023, homeowners looking to lower their energy bills or embrace a greener lifestyle will benefit from a zero VAT rate on solar installations, replacing the previous rate of 13.5%. This decision comes as a result of new conditions set out in the EU VAT Directive of 2022, allowing member states to apply a zero rate to certain goods. This blog explores the implications of the new VAT rate and its potential advantages for residential retrofitting projects.

Conditions

The zero VAT rate applies under specific conditions, primarily involving a supply and install contract. Homeowners must acquire their solar systems from solar companies that not only provide the panels but also handle the installation. This requirement aligns with the conditions for availing of SEAI microgeneration grants for solar energy, ensuring a standardized approach to solar installations.

The zero VAT rate applies to private dwellings, encompassing houses, apartments, and duplexes. However, a reduced VAT rate will be applied when the cost of goods used in the installation surpasses two-thirds of the total contract price.

Benefits

The zero VAT rate on solar panels promises considerable benefits to property owners seeking energy bill reductions, particularly during the ongoing energy crisis. According to estimates from the Department of the Environment, Climate, and Communications, this VAT exemption is expected to lower the average supply and install cost from €9,000 to €8,000, thus shortening the payback period for the solar system.

Eamon Ryan, the Minister for Environment, Climate, and Communications, emphasized the positive impact of this legislation on consumers and the environment alike. With over 50,000 homes already equipped with solar panels and 17,000 new installations connecting to the grid last year, the trend towards solar adoption is expected to continue as costs decrease and solar energy becomes more mainstream.

Looking beyond private residences, the potential extension of VAT-free status to larger developments offers numerous benefits for developers and communities due to the cumulative impact of solar installations on multiple properties so the reason. to promote sustainability and green building practices.

Moreover, entrepreneurs and professionals benefit from higher economies of scale. For such developments, the exemption from VAT on solar panels could allow suppliers to offer competitive prices, significantly reducing project costs. This not only supports financial returns but also enhances the market appeal of the business, attracting eco-conscious customers who value sustainable living.

The introduction of zero VAT on solar panels is a major step towards improving residential regeneration infrastructure and improving the use of solar energy The Irish government aims to encourage energy consumption better and encourage greener living by making solar installations easier and more economically attractive for homeowners

This VAT exemption, which can be extended to larger developments, holds the promise of additional cost savings, improved sustainability and wider environmental benefits but developers must and policymakers manage such expansions in an efficient and environmentally sound manner to ensure long-term benefits for the construction industry and the community.

If you would like to find out more about EDC's MEP sustainability solutions that can benefit your next project,?get in touch with?our leadership team today, or email us directly at [email protected].

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