On April 5, 2023 the Irish Department of Finance issued a press release announcing that on that same date the Irish government approved a report stage amendment brought forward by the Minister for Finance to the Finance Bill 2023. According to the press release the Bill gives legislative effect to the taxation measures recently announced by the Irish government, the purpose of which is to continue to assist families and businesses deal with high energy prices and cost of living challenges.

An additional measure in relation to solar panels has now been agreed. This measure is possible due to amendments made to Annex III of the VAT Directive in 2022, which added a number of new categories to which Member States can apply a zero or reduced rate of VAT. One such option is to apply a zero rate within category 10c which is for the ‘Supply and installation of solar panels on and adjacent to public and other buildings used for activities in the public interest, housing and private dwellings’.

The Department of the Environment, Climate and Communications has estimated that if a zero rate of VAT was passed on to consumers, it would reduce the average cost of the supply and installation solar panels for consumers from €9,000 to €8,000 and would thus help support households reducing their electricity bills. At €0.32c per KWh, this will reduce the payback period for installation from 7 to 6.2 years.

According to the Irish Department of Finance this is a permanent change. It is furthermore stated that the Minister of Finance secured government agreement that the zero rate of VAT will come into effect from May 1, 2023. In the press release the Ministry furthermore stated that the Minister will bring forward a Financial Resolution and an amendment at Report Stage of Finance Bill 2023 to give effect to the proposal.

The Department of Finance has estimated that the measure will cost €19 million annually.

Copyright – internationaltaxplaza.info

Follow International Tax Plaza on Twitter (@IntTaxPlaza)