Solar PV arrays could be subject to VAT rates as low as 5% under new arrangements agreed by EU finance ministers.

The European Council agreed to update the rules on VAT rates to bring them in line with EU priorities such as fighting the climate crisis.

According to the European Commission (EC), current EU VAT rules are almost 30 years old and were in urgent need of modernisation.

The Council has decided to widen the current list of goods and services that can benefit from reduced VAT rates to include solar panels installed on private homes and public buildings.

Other items on the list include green heating systems, bicycles and digital services such as internet and goods that protect public health.

Member states have the possibility to apply reduced rates as low as 5% for these goods and services.

Fertiliser

The Council has also agreed to phase out reduced VAT rates or exemptions on fossil fuels and other goods, with a similar impact on greenhouse gas emissions by 1 January 2030.

This also includes peat and wood used as firewood.

However, the ministers agreed that reduced VAT rates and exemptions for chemical fertilisers and chemical pesticides would remain in place until 1 January 2032.

This delayed timeline has been chosen to give small-scale farmers more time to adapt, the Council has said. There is currently no VAT charged to fertiliser in Ireland.

The lower rates will become possible once the European Parliament is consulted on the agreement.