Dáil Éireann Debate, Wednesday - 12 October 2022
47. Deputy Matt Carthy asked the Minister for Finance further to Parliamentary Question No. 117 of 29 September 2022, if the EU VAT directive allows a member state to apply a reduced rate of VAT regarding the supply and installation of solar panels on agricultural buildings; and if he will make a statement on the matter. [50574/22]
Amharc ar fhreagraI am advised by Revenue that the 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. Ireland is also permitted to retain some historic VAT arrangements, under strict conditions.
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." This does not include agricultural buildings.
Outside of the above category in Annex III, the supply of solar equipment, including rooftop solar photovoltaic, is liable to VAT at the standard rate, currently 23%. However, if these goods 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 the goods for example, solar panels. As a result, if solar panels were supplied on agricultural buildings 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.
The Deputy should also note that in accordance with the EU VAT Directive farmers may register for VAT or be treated as an unregistered flat rate farmer for VAT purposes. Farmers that are not registered for VAT are not entitled to recover VAT incurred on their expenses. However, these farmers are compensated for the VAT incurred on goods and services used in the course of their farming business through the flat rate addition which they receive on payments for their supplies of agricultural produce and services.
Unregistered farmers may also be able to avail of a VAT refund on certain expenses allowed for under the Value-Added Tax (Refund of Tax) (Flat-rate Farmers) Order 2012 (S.I. No. 201/2012). This provides for a refund of VAT to unregistered farmers on “the construction, erection or installation of qualifying equipment for the purpose of micro-generation of electricity for use solely or mainly in his or her farming business”. The equipment that qualifies under this Refund Order includes a wind turbine system, photo-voltaic system, and equipment ancillary to these systems.
Alternatively, farmers may elect to register for VAT and will have an entitlement to reclaim VAT on costs incurred in relation to their farm business. A VAT registered farmer would be entitled to reclaim VAT incurred on the purchase and installation of solar panels used for their farming business through their VAT returns.
