Like some of our customers, you might wonder whether you are eligible for the Value-Added Tax (VAT) reduction on your solar energy system. Some companies even offer solar installations with lower VAT (10 % instead of 21 %) included. We’re here to shed light on your questions about reduced VAT on the installation of solar panels for self-consumption. Let’s briefly cover the most important points:
- What VAT is applied to the installation of solar panels for self-consumption?
For most of the residential installations in Spain, the VAT currently is 21%. Unlike companies, private households/individuals can’t offset this VAT as they are considered final consumers. There are specific circumstances where a reduced 10% VAT may apply, but be careful—it comes with specific requirements.
- When can a reduced 10% VAT be applied to the installation?
According to Law 37/1992 on VAT, reducing VAT from 21% to 10% is only possible if the installation is part of a rehabilitation project, and the material cost doesn’t exceed 40% of the investment. Be wary of companies compromising installation quality for lower material prices or offering installations with 10 % VAT by default. It is important to note that usually, solar installations don’t fall into the rehabilitation category unless it is a complete house renovation or you are building a new house with solar installation included from the start.
- What are the consequences for those who bought a solar installation with a 10% reduced VAT without meeting the mentioned criteria?
If your solar installation is not eligible for the reduced VAT, you can expect a letter from the Spanish Tax Agency demanding the unpaid 11%. Importantly, fraud detection can lead to penalties and even criminal liability.
- Is it true the EU is considering a reduced VAT for renewable energy installations?
Yes, in 2021, the EU discussed a 0-5% VAT for residential solar panels to promote energy self-consumption and reduce CO2 emissions. This gives governments flexibility in fiscal measures, aligning with common priorities like combating climate change. We hope this proposal will take the form of a law soon and apply to all residential installations- if it happens, we will surely let you know! In the meantime, the current regulations allow for VAT reduction only under the specific conditions we mentioned.
Any questions? Reach out to us for a free consultation!
At RAD Energy, we prioritize customer service and a quality experience. We hope this article has clarified most of your doubts about VAT reduction for solar panel installations. If you still have questions, feel free to reach out to us at solar@radenergy.es or via the contact form.