Ireland’s Solar Tax Exemption for residential solar systems, in place since 2017, is set to end in December 2025. This exemption has allowed homeowners to install solar panels without paying VAT, significantly lowering the overall cost of installation. The 0% VAT rate was introduced to make solar energy more affordable and accessible.
Financial Impact of Ending the Solar Tax Exemption
Ending the Solar Tax Exemption is expected to have a significant impact on the cost of residential solar systems in Ireland. The Irish Examiner reports this change will likely increase the price of installations by 13.5% starting in January 2026.
Such an increase could deter many homeowners from investing in solar energy, slowing the growth of renewable energy adoption across the country.
The Department of Finance has confirmed the Solar Tax Exemption will not be extended beyond 2025, citing EU regulations as the primary reason. Under EU rules, such exemptions cannot continue beyond a specified period unless a member state chooses to extend them—an option Ireland has declined.
This decision has been met with criticism from renewable energy advocates and environmental groups. They argue that the government should prioritize renewable energy initiatives, especially in light of Ireland’s ambitious climate targets, and view the end of the tax break as a step backward in promoting clean energy. The move is seen as contrary to the global push towards renewables, where countries like Iraq, for example, aim for solar to supply 33% of their electricity needs by 2030, as detailed in this market analysis of Iraq’s solar panel manufacturing sector.
Government’s Stance on the Tax Exemption
In response to concerns about the expiring tax break, Minister for Finance Michael McGrath has emphasized that the exemption was always intended as a temporary measure to help increase the adoption of solar energy in the residential sector.
He did, however, acknowledge the importance of continuing to support renewable energy initiatives, mentioning that the government is exploring other ways to encourage the adoption of solar energy.
Despite Minister McGrath’s reassurances, environmental groups and renewable energy advocates remain disappointed with the decision. They argue that the exemption has played a crucial role in making solar energy more affordable and accessible to homeowners, and its removal could hinder progress toward Ireland’s climate goals.
Friends of the Earth Ireland, a leading environmental organization, has called on the government to reconsider its decision and extend the exemption. The group argues that removing the tax break will discourage homeowners from investing in solar energy, which could have long-term negative effects on Ireland’s renewable energy targets.
Potential Solutions and Alternatives
While the end of the Solar Tax Exemption is a setback for the renewable energy sector, several alternatives could help mitigate the impact. One option is for the government to introduce new incentives or subsidies to offset the higher cost of solar installations.
Another option is for the government to work with the solar industry to develop financing models that make it easier for homeowners to invest in solar energy. These could include low-interest loans or leasing programs that reduce the upfront cost of installations.
In the meantime, homeowners are urged to take advantage of the Solar Tax Exemption while it lasts. With the 0% VAT on domestic solar panels in Ireland ending in December 2025, there is a limited window to benefit from reduced installation costs before the VAT is reintroduced.
