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24 June 2019 / news

VAT deduction on construction costs for residential property with solar panels

Two different lower courts have ruled within a two week period on the deduction of VAT on the construction costs of a new-build residential property with integrated and non-integrated solar panels, respectively.

Awards

The conclusion is that with both integrated and non-integrated solar panels the VAT on construction costs for the property can be partially deducted, albeit that the deduction is higher for non-integrated solar panels.

Issue of law and interest

If interested parties generate solar energy using solar panels installed on their home and then feed this energy into the network, the question arises to which extent deduction of VAT can be claimed with regard to the construction costs for the residential property. After all, since part of the roof is used to support the solar panels, the property has partly acquired a commercial function.

Judgment

According to the court the commercial use of the residential property must be determined by dividing the surface area of the solar panels by the total floor and roof area of the residential property, regardless of the type of solar panels. With integrated solar panels a correction must also be made for the personal use of the solar panels as roofing to replace roof tiles. This correction is not made with non-integrated solar panels. A correction must also be made insofar as energy is generated for direct personal use. The combination of these percentages ultimately determined the level of the VAT deduction on the construction costs for the newly-build residential property.

Practical interest

We believe that these two rulings provide good arguments for claiming (partial) deduction of VAT on the construction costs of the residential property for both integrated and non-integrated solar panels. This obviously also applies when the solar panels are installed on an office building instead of a residential property.

Contact

If you have any further questions on this issue or would like to receive more information, please contact Jérôme Germann, Jérôme Ariës or your trusted adviser at the Loyens & Loeff Real Estate Tax Team.​



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