Luxembourg Clarifies VAT Treatment of Photovoltaic Installations

Luxembourg Releases a VAT Circular on Photovoltaic Installations

Luxembourg's VAT authority has published Circular No. 814, clarifying when operators of solar panel installations become taxable persons, when they can deduct input VAT, and how the small enterprise franchise applies.

On 1 June 2026, the Administration de l'enregistrement, des domaines et de la TVA (AED) issued Circular No. 814 on the VAT regime applicable to photovoltaic (PV) installations connected to an electricity network. The circular is particularly relevant for households and small operators producing solar electricity, but it also confirms important principles on economic activity, self-supplies, and the EU small enterprise scheme as applied in Luxembourg.

How are photovoltaic installations treated for VAT purposes?

As a preliminary point, the circular confirms that photovoltaic installations are regarded as immovable property within the meaning of Article 13b of Implementing Regulation (EU) No 282/2011. To fulfil their function, solar panels must be integrated into the electrical or thermal infrastructure of a building, and they therefore form an integral part of that property.

The VAT treatment depends on how the electricity is used - and the circular distinguishes three scenarios:

1. The operator sells the entire production to the network

Selling all electricity produced to the network operator constitutes an economic activity carried out to obtain income on a continuing basis. This is the case regardless of whether the activity is profitable or carried out as a hobby — and, in line with the CJEU judgment in case C-219/12 (Fuchs), even where the electricity produced is consistently lower than the operator's own private consumption.

The operator therefore qualifies as a taxable person and must register for VAT, with the corresponding filing and payment obligations. The supply of electricity to the network operator is subject to the reduced VAT rate, and input VAT on the investment and on costs directly related to the operation and maintenance of the installation is fully deductible.

2. The operator consumes all the electricity produced

An operator who consumes the entire production for private household purposes does not carry out an economic activity and is not a taxable person. No input VAT deduction is available, and there are no VAT registration or filing obligations.

Operators who are already VAT registered and decide to stop selling electricity must request deregistration. Where input VAT on the investment was fully deducted and the ten-year capital goods adjustment period has not yet expired, the deduction must be adjusted accordingly.

3. The operator self-consumes and sells only the surplus

An operator who covers their private needs and sells only the surplus to the network is a taxable person with full VAT obligations and a full right of deduction. However, the self-consumed portion of the production must be declared as a taxable self-supply at the reduced rate. The taxable amount is determined by applying the purchase price of similar (green) electricity from a third party to the quantity self-consumed.

Are there any exemptions for small enterprises?

Operators whose annual turnover does not exceed EUR 50,000 may apply the small enterprise franchise under Articles 57 to 57ter of Luxembourgish VAT Law. Where the operator carries out other taxable activities, the turnover of all activities is aggregated for the threshold test.

If the EUR 50,000 threshold is exceeded during a calendar year by no more than 10%, the franchise continues to apply for that year. If it is exceeded by more than 10%, the franchise ceases from the day following the day on which the threshold was exceeded.

Operators under the franchise are released from filing VAT returns, provided no VAT became due during the year, but they must notify the AED in writing before 1 March of the turnover realised in Luxembourg in the preceding calendar year.

Invoices must include the reference "TVA non applicable – Article 57bis de la loi du 12 février 1979" (operators established in Luxembourg) or "TVA non applicable – Article 57ter de la loi du 12 février 1979" (non-established operators). Operators applying the franchise cannot deduct input VAT on their investment.

What this means in practice

The circular leaves little room for doubt: any operator selling electricity to the network for consideration — even occasional surpluses from a domestic rooftop installation — becomes a taxable person in Luxembourg.

In practice, most small operators will rely on the EUR 50,000 franchise to avoid ongoing VAT compliance obligations, accepting in exchange the loss of input VAT recovery on the installation.

Operators expecting significant input VAT on their investment should weigh the franchise against standard VAT registration before making a choice.

How can Marosa help you?

Marosa assists businesses with their VAT registrations and ongoing compliance obligations across Europe, including Luxembourg. If you have questions about the VAT treatment of energy supplies or your registration obligations, make sure to get in touch with our team or read our complete guide on VAT in Luxembourg.

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