Dáil Éireann Debate, Thursday - 22 June 2023
114. Deputy Marc Ó Cathasaigh asked the Minister for Finance if he will consider a reduction in VAT to zero on heat pumps, similar to the treatment of VAT on solar panels; and if he will make a statement on the matter. [29886/23]
View answerAs previously noted to the Deputy, under the EU VAT Directive it is not possible to reduce the VAT on heat pumps to zero. However, following changes agreed last year in Annex III of the aforementioned Directive, there is scope to reduce the VAT rate in highly efficient low emissions heating systems to a reduced VAT rate. In Ireland that would mean a rate of 9% or 13.5%.
However, these systems have to comply with very specific technical requirements, meeting the emission benchmarks laid down in Annex V of Commission Regulation (EU) 2015/1189 and in Annex V of Commission Regulation (EU) 2015/1185 respectively and also have to be attributed an EU energy label to show that the criterion referred to in Article 7(2) of Regulation (EU) 2017/1369 is met.
Changes in VAT rates are considered as part of the normal annual Budget and Finance Bill process. It should be noted that while heat pumps have the standard rate of VAT applied they have an effective rate of 13.5% VAT due to the 'two-thirds rule' which applies to construction. This rule means that if the cost of the goods used in carrying out work does not exceed two-thirds of the total price, the rate which applies to the service then applies to the entire transaction.
