Dáil Éireann Debate, Thursday - 10 November 2022
205. Deputy Denis Naughten asked the Minister for Finance if he will consider a reduction in VAT on heat pumps and solar panels to encourage the investment by homeowners in same; and if he will make a statement on the matter. [55972/22]
View answerThe VAT rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate (currently 23% in Ireland), unless they fall within the categories of goods and services specified in Annex III of the VAT Directive, in respect of which Member States may apply a lower rate of VAT.
Following amendments to Annex III of the VAT Directive, agreed in April 2022, it now includes a category for "the supply and installation of solar panels on and adjacent to private dwellings, housing and public and other buildings used for activities in the public interest."
Outside of the above category in Annex III, the supply of solar equipment, is liable to VAT at the standard rate, currently 23%.
I have decided not to make any change to this rate because of the fact that when solar panels are supplied as part of a “supply and install” contract, they may be subject to VAT at the reduced rate of 13.5%. A “supply and install” contract is where installation services are provided in conjunction with goods such as solar panels. As a result, if solar panels are supplied as part of a “supply and install” contract, then the contract may be subject to VAT at the reduced rate of 13.5%, provided that the value of the goods supplied does not exceed two thirds of the total value of the contract. I believe the reduced rate applied in these circumstances is sufficient.
The revised Annex III of the VAT Directive also includes provision for a reduced rate to apply to the supply and installation of highly efficient low emissions heating systems meeting the emission (PM) benchmarks laid down in Annex V to Commission Regulation (EU) 2015/1189 and in Annex V to Commission Regulation (EU) 2015/1185 and having been attributed an EU energy label to show that the criterion referred to in Article 7(2) of Regulation (EU) 2017/1369 of the European Parliament and of the Council is met.
However, similarly to solar panels, if such heating systems are supplied as part of a “supply and install” contract, then the contract may be subject to VAT at the reduced rate of 13.5%, provided that the value of the goods supplied does not exceed two thirds of the total value of the contract. I also believe the reduced rate applied in these circumstances is sufficient.
