Clean Power

Published on June 28th, 2013 | by James Ayre


Home Solar PV In Europe Not Subject To VAT (Consumption Tax), EU Court Rules

June 28th, 2013 by  

Editor’s Note: This is quite big news (if I’m understanding the ruling correctly), but I haven’t seen much coverage of it. Perhaps that’s just because it’s related to the EU and I don’t follow many EU-based sites. No VAT (consumption tax) on home solar PV could be a big step forward. (Correct us if we’re missing something.)

Solar photovoltaic systems purchased for household use within the European Union will no longer be subject to any VAT (a type of consumption tax) — even if they don’t produce a net surplus of energy that is then fed back into the grid — as per a new ruling by the European Court of Justice.

Image Credit: European Court of Justice via Flickr CC

Image Credit: European Court of Justice via Flickr CC

The ruling is the result of a challenge made by an Austrian homeowner who argued that he shouldn’t have to pay VAT because it’s a form of economic activity. His local tax office had previously ruled that he couldn’t reclaim the VAT paid on his solar PV system as his system generated less energy than his household used. However, the European Court of Justice in Luxembourg disagreed with this local tax office — it noted that profit or loss didn’t matter, that a solar power system that feeds electricity into a grid for payment on a regular basis is indeed a form of economic activity. The ruling was just announced last Thursday.

The Austrian homeowner in question — a Mr Fuchs from the Linz district of Austria — installed his system back in 2005 and now provides electricity to Ökostrom Solarpartner.

Like many other household solar PV systems, Mr Fuchs’ system generates somewhat less energy than his household uses on a monthly basis. As a result, he pays slightly more on his electric bill most months than he receives from Ökostrom Solarpartner for the electricity that his system produces. To his mind (and mine), regardless of whether or not he was feeding a net total of electricity into the grid, the activity of selling electricity to Ökostrom Solarpartner constituted an engagement in “economic activity.” Why wouldn’t it? That’s what other electricity providers who sell electricity to the grid are engaged in.

The local tax office — the Freistadt Rohrbach Urfahr finanzamt — had argued that because his system wasn’t providing a net surplus of electricity to the grid that it didn’t constitute an economic activity, and thus he was still subject to VAT. As a result of the local tax office’s ruling, Mr Fuchs appealed to the Independent Finance Tribunal of Linz, which then sought guidance from the EU Court of Justice, who finally ruled in his favor.

This recent verdict from the EU Court of Justice means that the cost of installing a solar energy system anywhere in Europe shouldn’t be subject to VAT, which considerably reduces the cost of solar for homeowners.

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About the Author

's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.

  • JamesWimberley

    Germany does not levy VAT on residential PV installations, as you have reported here. You have to look at he impact country by country.

  • Wayne Williamson

    Frondeskias, thanks for posting the link.
    Very interesting ruling….
    Looks like as long as the installation doesn’t go over self use, you don’t have to pay the vat. If it does, like adding some more panels, you will be charged the vat on the original plus the addition. Just my take on the doc…anyone else?

    • Dany

      This ruling means non of these things. This ruling means that putting panels on your roof to sell electricity is an economic activity no matter the scale and the taxation is the same as in any other case of economic activity. But i think according to this ruling you may be subject to other types of taxes.

      • Wayne Williamson

        Right, like I said I you put panels up with no intention of selling the electricity, then there is no penalty.

  • Ross

    Great boost for home solar if the EU states don’t find a way to circumvent this ruling. Mean VAT rate is about 20%.

  • Frondeskias
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