Household PV systems exempt from VAT, says European court

  • European Court of Justice, Luxembourg.
    The European Court of Justice, Luxembourg, ruled that PV systems are exempt from VAT. Image: SPRKLG.

Homeowners will now be able to reclaim VAT paid on domestic PV installations following a European Court of Justice ruling.

The court last week upheld an appeal by an Austrian homeowner who maintained that he should have VAT he paid when purchasing a PV system reimbursed as the equipment was being used for generating income.

The individual concerned, Thomas Fuchs, installed a PV system in 2005 and sells the electricity to Ökostrom Solarpartner.

Mr Fuchs, from the Linz area of Austria, applied to the local tax office to have the initial VAT costs of the system installation reimbursed.

But his request was refused on the basis that the amount of electricity he sells is less than his household requires each month and that he is therefore not engaged in “economic activity”.

Mr Fuchs appealed to the Linz District Independent Finance Tribunal, which sought advice from the European Court of Justice on the matter.

In its verdict, the court concluded that the operation of a PV installation does amount to “economic activity” if it is used for obtaining income on a regular basis.

It defined “income” as meaning “remuneration received as consideration for the activity carried out” and said the question of whether or not this was for a profit was “irrelevant”.

The ruling means the upfront costs of PV systems under EU law are technically exempt from VAT where the electricity generated by the system is regularly fed into the grid, regardless of whether or not that makes any profit.

The court said its ruling would be binding in other EU member states, but PV Tech understands that it would not have implications for countries that do not use net metering, such as the UK.


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