Why can I ask for VAT? #
- Anyone who sells stuff to others is in fact an entrepreneur, just like a baker who invests money in an oven and uses the oven to bake bread that he subsequently sells to others.
- For the bread the baker sells to others, he has to charge VAT, and this VAT you have to pay annually to the tax authorities.
- On the other hand, the baker may request the VAT he paid on the items he needed for his company, such as the oven, from the tax. You report the total of your VAT payment and refund in your VAT return.
- For someone who installed solar panels, it works the same way. The solar panels make a product (i.e. electric current) and that product is sold to others (i.e. to the energy supplier). Although part of the power is used directly in the home, there is usually a part that is returned to the power grid, and for which you get a fee. The fee is the amount deducted by the energy supplier from your electricity bill.
- That's why someone with solar panels is seen as an entrepreneur. As an entrepreneur, you basically have to pay VAT on the power you supply to the net, and at the same time you can request the VAT you paid on the solar panels from the tax authorities.
How can I make the IRS see me as an entrepreneur? #
Do you want to be considered an entrepreneur and qualify for 21% VAT refund on your investment in solar panels? Then you need to apply for a VAT number from the IRS. This VAT number is essential for submitting your VAT return. In this declaration you must specify how much VAT you have received from your customer, and how much VAT you have paid on your investment.
The latter is quite simple: the 21% VAT on your solar panel installation. However, the amount of VAT that you have received from your customer: the energy supplier depends on the amount of electricity that you have sold. The exact quantity of kilowatt hours delivered and the corresponding VAT amounts may require some administrative effort. Checking these data is also a challenge for the tax authorities.
Therefore, the tax authorities have established a simple rule: they estimate the amount of VAT you would have received based on the power of your solar panels. The more power you have installed, the higher the estimated VAT return would be. This estimate is known as the "forfait', and is usually only a few tens. For systems where the solar panels are placed on the roof (and not in the roof, such as in-roof systems), the tax authorities shall calculate the flat rate as follows:
Watt peak power | Forfait |
0 – 1000 | €20 |
1001 – 2000 | €40 |
2001 – 3000 | €60 |
3001 – 4000 | €80 |
4001 – 5000 | €100 |
5001 – 6000 | €120 |
6001 – 7000 | €140 |
7001 – 8000 | €160 |
8001 – 9000 | €180 |
9001 – 10.000 | €200 |
In principle, every year you produce electricity with your solar panels you should make a VAT return and pay the corresponding fee to the tax authorities. But for the tax authorities the additional administrative burden does not outweigh the amount they would receive. Therefore, the Small Businesses Scheme exists, in short KOR. According to the KOR you do not have to make a VAT return if the amount you would have to pay for VAT (in our case: the flat rate) is too low. That is why you only have to make a VAT return once in the first year after the installation of the solar panels, so you can get back the 21% on the purchase, minus the flat rate. For the years after, you are exempt from VAT.
What steps do you have to take to get the VAT back on solar panels? #
First, you have to apply for a VAT number from the IRS. If you already have a VAT number because you are already an entrepreneur and your partner is not, sometimes it can be more convenient to have the installation registered to your partner. Your partner can then apply for a VAT number. In that case, your partner's name must also be on the contract with the energy supplier.
On the website of the tax authorities you can fill out a form to make all steps for the VAT refund on solar panels in order.