The Ministry of Finance in the Netherlands is mulling a move to remove value added tax (VAT) on solar panels for residential sector which currently amounts to 21%, and is seeking views on the same.

If the ministry decides favorably, basis responses received and budgetary considerations, it would bring down VAT on the supply and installation of solar panels on or in the immediate vicinity of homes, to zero. The measure will then come into effect from January 1, 2023.

Homeowners who have already installed solar panels for their homes need to register and file a VAT return under current arrangement to claim a refund. While it leads to additional administrative work for the authorities, it also acts as a deterrent to more denizens opting for private solar panels, according to the ministry.

Scrapping VAT altogether is aimed at reducing administrative/implementation burden for the government as then its machinery won’t have to process registrations and ensure VAT returns. At the same time, it will make investment in solar panels for residential segment an attractive proposition.

In case the VAT is removed, for the next one year of its implementation, the government will monitor if the measure is working as expected or if there are any side effects.

Opened on April 19, 2022, the consultation will end on May 20, 2022. Further details are available on the government website.

The proposed measure comes after the European Council proposed to bring down VAT rates on products and services considered beneficial for the environment including solar panels for homes and buildings (see Solar PV Panels May Get Cheaper In EU).

One of the largest European solar markets today, the Netherlands has the potential to install up to 132 GW of solar PV capacity by 2050, according to a recent report of Dutch research organization TNO (see Dutch Solar Energy Potential: 132 GW By 2050).