The Council of the European Union has adopted a directive allowing member states to reduce value-added tax (VAT) for certain products and services that are consistent with EU environmental and health policies.

Solar panels for residential use will also benefit from this tax relief, alongside pharmaceutical, contraceptive and hygienic protection products, medical protection products, transport and passenger transport services, books, newspapers and paper publications and digital media, among others.

The directive specifies that member states will have the possibility to promote the use of renewable energy sources by means of reduced VAT rates. “In order to support the transition to the use of renewable energy sources and to promote the Union's self-sufficiency in energy, it is necessary to allow member states to improve access for end consumers to green energy sources,” the document reads. “Member states shall communicate to the VAT Committee the text of the main provisions of national law and conditions for the application of the reduced rates referred to in the first paragraph no later than 7 July 2022.”

The Directive No. 2022/542 was published in the Official Journal of the European Union on April 5. According to the new provisions, member states will be free to apply a VAT rate of 0% to 5%.