Last week, the finance ministers of EU countries reached an agreement. Since then, solar modules sold in the EU may be subject to a lower VAT rate.

In order to align tax rules with EU priorities, such as tackling the climate crisis, the European Council agreed to update the VAT rate rules. At the same time, doing so will also provide governments with more flexible applicable tax rates.

After consultations, EU member states decided to expand the scope of the current list of goods and services to include solar cell modules installed in private homes and public buildings. These goods and services can benefit from the reduced value-added tax rate.

Solar modules installed in private houses and public buildings can reduce the value-added tax rate

Walburga Hemetsberger, CEO of the trade association SolarPower Europe (SPE), said in a statement to the media, "This is an early Christmas gift from the council."

"Recently, the price of natural gas has pushed up the price of electricity, and many Europeans have been affected. But soon, the decline in the solar energy value-added tax rate will make it easier for European households and businesses to afford solar energy investment and obtain clean and cheap electricity."

In addition to solar modules, items such as green heating systems and bicycles will also benefit from lower value-added tax rates. The updated list also includes digital commodity services such as Internet integration and public health protection.

According to the new regulations, EU member states will continue to implement standard VAT rates higher than 15%. At present, member states can also apply two reduced tax rates as low as 5% for up to 24 categories of goods and services.

The council also agreed to phase out the value-added tax cuts on fossil fuels and other commodities that have similar effects on greenhouse gas emissions, or adopt tax exemptions before January 2030.

According to the European Commission, the current EU VAT rules are nearly 30 years old and urgently need to be updated. The updated rules will be sent to the European Parliament so that the Parliament can negotiate the final text before March 2022.

Earlier this year, the European Union announced a new target of 40% of the final consumption of renewable energy in 2030, which is higher than the previous target of 32%. SPE predicts that achieving this goal requires the development of a total of 660 GW of solar photovoltaics throughout Europe.