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Photovoltaic panel users in the VAT trap – how to avoid it?

19 August 2024 | Knowledge, News

More and more people are choosing to buy and install photovoltaic modules. This is due to both environmental concerns and the more down-to-earth cost-saving opportunities offered by subsidy schemes.

However, few are aware of the tax implications of using these modules for private purposes. And that includes when they are installed on residential buildings – so let’s look at how to avoid some of the VAT pitfalls.

Solar power generation and VAT

The case law of the Court of Justice of the European Union and the position of the tax authorities show that even those who have not previously been VAT payers should carefully analyse their accounts in relation to the production of electricity from photovoltaics.

Such conclusions are prompted, inter alia, by the well-publicised CJEU judgment of 20 June 2013 (C-219/12, Fuchs) concerning a situation where the complainant installed photovoltaic modules on his private home, produced electricity mainly for his own use and sold the surplus to an energy company.

The complainant considered himself to be a VAT payer and claimed a refund of the input tax on the purchase of the modules, but the national authorities refused on the grounds that he did not carry out any economic activity.

In its decision, the CJEU distinguished between two situations:

  • Where the modules are used exclusively for private purposes and are not connected to the power grid; and
  • Where the modules are used both for private purposes and to supply energy to an energy company

In the first case, there is no economic activity and no VAT taxation, while in the second case, the operation of the modules is subject to VAT as a supply of goods.

Photovoltaics and VAT – what the Polish tax authorities say

The interpretation of the CJEU in the Fuchs case has a significant impact on the position of the Polish tax authorities, which often refer to this judgment in their decisions.

Those who are interested in installing or who are already using photovoltaic panels to generate electricity should therefore carefully analyse their situation from a VAT perspective.

Those who use the energy only for their own consumption generally have nothing to worry about, but if they sell part of the generated energy, they may have to pay VAT. This involves the obligation to:

  • Charge the tax
  • Issue an invoice (which may be difficult under the new net-billing system)
  • File a VAT return

It is possible to benefit from a VAT exemption, but only for taxpayers whose turnover in the previous year did not exceed PLN 200,000. Therefore, before planning to install a photovoltaic system, it is advisable to carefully analyse your situation and determine whether you will be able to benefit from this exemption.

Source: Rzeczpospolita

Date: 24.06.2024

Any questions? Contact us

Sławomir Wnuczek

 

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Contact us:

Sławomir Wnuczek

Sławomir Wnuczek

Advocate / Associate / Tax Law

+48 784 084 522

s.wnuczek@kochanski.pl