VAT refund for home batteries possible, but subject to conditions

In late 2023, Energy Storage NL (ESNL) and Holland Solar met with the Tax Authority to discuss an investigation into the VAT refund on home batteries. The results came out recently and are explained below.

Home batteries are typically used to store self-generated electricity, from e.g. solar panels, for later consumption. The premise is that home batteries are used for private use and not for other purposes (such as trading in the electricity markets).

Contrary to this, it was explained in the discussion with the tax authorities that some parties may also market the home battery with EMS for use for the purpose of power trading. The idea here is that power is purchased and stored based on dynamic price contracts when the price is low and delivered (back) to the power company when the price is high. As a rule, the latter is twice a day, in the morning (peak) and evening (peak) hours. As a result, there will be an opportunity for consumers to reclaim VAT on the home battery, just as was previously the case with solar panels. Consumers who want to qualify for this can file a case with the tax authorities.

Conditions for the VAT refund

• If, depending on the facts, there is VAT-taxed trade, account must be taken of people who are VAT entrepreneurs because of the solar panels on their homes and use the small business scheme for that purpose. This means that they are exempt from VAT and declaration obligations, but then also not entitled to deduct VAT charged to them. This then also applies to the purchase of a home battery.
• If the home battery were purchased in the context of taxed entrepreneurial activities, VAT would be due on the entire turnover achieved with the (return) supply of electricity to the energy company. This requires separate invoicing and VAT calculation by, in practice, the energy company. Whether and how the energy companies can comply with this is not clear and will involve additional administrative burdens.
• The owner of the home battery in the previous situation will also be bound by periodic VAT returns and administration obligations related to the VAT due. On balance, his VAT position may also involve a remittance instead of a refund. This is all the more true if he would then also purchase solar panels and have to pay VAT on the solar power generated (irrespective of the fact that 0% VAT is charged on the purchase of the solar panels).
• Energy tax (EB) will be due on the purchase of energy. One question is how this works out with (the phasing out of) the balancing scheme.

Conclusion: no generic option to reclaim VAT

This leads the Tax Authorities to conclude that no generally applicable position can be determined for the VAT treatment of a home battery. This requires a factual assessment per individual situation. Therefore, there is no generic possibility to reclaim the VAT of home batteries. Questions can be submitted to the Tax and Customs Administration on a case-by-case basis via a so-called preliminary consultation.

The coming period will have to show what these developments will mean for the home battery. Holland Solar and ESNL are looking with interest at the first cases for VAT exemption on which the tax authorities will issue a ruling. In addition, both industry associations are calling on the Tax Authorities to proactively communicate the possibilities and conditions of a VAT refund to the market as well, so that consumers can act consciously on this. More information and a standard form can be found on the website of the IRS.