Reduced tax benefit for residential solar systems is coming to an end in July 2025
Since 2021, homeowners in Portugal have been able to take advantage of a significantly reduced IVA (VAT) rate of 6% on the installation of solar energy systems for private residences. This tax reduction, introduced by the government to support energy transition goals, has made solar more financially accessible for many households. However, this benefit is scheduled to end on June 30, 2025, when the VAT rate will revert to the standard 23%.
Source: Portuguese State Budget Law 2021 and confirmed in Orçamento do Estado para 2024 (Lei n.º 82/2023)
A measure to support energy transition
The 6% IVA measure was one of several initiatives rolled out to support Portugal’s wider plan for reducing carbon emissions and promoting renewable energy adoption in homes. In line with EU directives, the goal has been to make clean energy more attainable for the general public and help move the country away from fossil fuels.
By reducing the upfront tax on solar panels and related equipment, the government aimed to ease the financial barrier for homeowners interested in going solar. However, this support is limited to systems installed and completed by the end of June 2025 – after that, the regular VAT rate will apply.
What equipment and services are covered?
The 6% IVA rate applies to various components and services related to residential solar installations. This includes solar photovoltaic panels and inverters, including both traditional inverters and hybrid models, which are essential for converting the direct current (DC) generated by the solar panels into alternating current (AC) for use in homes.
In addition to the panels and inverters, the reduced rate applies to solar battery systems that store the energy produced by the solar panels for later use, enhancing the efficiency and reliability of the system. The installation services, materials and equipment required to set up and ensure the proper functioning of the solar system are also included under the reduced IVA rate.
Impact on costs
This lower IVA rate can make a noticeable difference in the total cost of a solar installation. For example, a system priced at €7,000 would currently add €420 in VAT at the 6% rate. Once the rate returns to 23%, the VAT for the same system would rise to €1,610, an increase of nearly €1,200.
That difference alone has been a strong motivator for many households to take action before the deadline.
Planning ahead
Although the deadline is now just weeks away, it’s important to remember that solar installations can’t be rushed. The process typically involves several stages, from site assessments and system design to permits and scheduling, all of which take time.
With demand expected to peak in the final stretch, the availability of installers may become limited, leading to potential delays.
To benefit from the reduced 6% VAT rate, systems must be delivered before the end of June. For those still considering solar, swift action is essential to meet the deadline.
Portugal’s renewable energy targets
Portugal has been a leader in renewable energy, with nearly 60% of its electricity generation coming from renewable sources in recent years. The government has set targets to achieve 80% renewable electricity production by 2030, with solar playing a major role.
Source: Portuguese Ministry of Environment and Energy – Plano Nacional Energia e Clima 2030 (PNEC 2030)
Incentives like the reduced VAT were introduced to help households contribute to these national targets, while also lowering their energy bills and increasing energy independence.
What Happens After the Deadline?
As of now, there has been no official announcement about extending the reduced VAT beyond its current end date. The 23% VAT rate will automatically apply to all residential solar systems installed after 30 June 2025 unless new legislation is introduced.
For those thinking about solar, it’s wise to stay informed, explore available options, and factor this deadline into any planning.
Voltaicos is a solar company in the Algarve, specialising in installations for international homeowners. The team speaks English, Dutch, German, and French, ensuring personalised service.
www.voltaicos.pt | +351 926 250 355 | info@voltaicos.pt
