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In a bid to promote energy efficiency and sustainability, Portugal’s Association of Mechanical & Electrical (M&E) Contractors and Installers is calling for an extension of the government’s reduced 6% VAT rate for air conditioning systems and heat pumps. The measure, which has been in place since 2022, provides a significant reduction from the standard 23% VAT rate, aiming to make environmentally friendly technologies more accessible to consumers.
The VAT reduction is set to expire on June 30, 2025, but there is currently no indication that the government plans to extend the policy in the 2025 State Budget, which has yet to make any reference to this issue.
Impact on Green Technology Adoption
The 6% VAT rate is not limited to air conditioning and heat pumps. It also covers solar thermal systems, photovoltaic (PV) panels, inverters, and batteries, all of which contribute to a more sustainable energy landscape. The measure was first introduced to help accelerate the transition to energy-efficient solutions, in line with Portugal’s National Energy and Climate Plan (PNEC 2030).
According to Celeste Campinho, the President of the Portuguese Association of M&E Contractors (AIPOR), the extension of the reduced VAT rate is “crucial” for encouraging consumers to adopt more environmentally friendly practices. “Without this reduced rate, decarbonisation efforts will be severely hindered, as consumers face a substantial price increase due to a 17 percentage point jump in VAT,” she emphasized.
Decarbonisation and Sustainability Goals at Risk
The policy has been hailed as an important tool in accelerating the replacement of inefficient air conditioning systems and driving the adoption of clean energy solutions. However, with the impending VAT hike, there are growing concerns that the transition to more energy-efficient and sustainable technologies could slow down.
“The timing of this decision is crucial, as decarbonisation is vital to guarantee a sustainable future for generations to come,” said Campinho. “In the context of Europe’s broader energy efficiency and sustainability commitments, it is essential to continue fostering consumer demand and supporting the market.”
Future Considerations for Tax Policy
As the EU and global markets push forward with energy efficiency goals, it remains to be seen whether Portugal will extend the VAT reduction as a strategic move to further its environmental goals. Advocates of the policy argue that the short-term loss in VAT revenue could be outweighed by the long-term benefits of a cleaner, more sustainable energy sector.
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Portugal’s Green Energy VAT Reduction in Jeopardy
The 6% VAT on air conditioning, heat pumps, and solar systems is set to expire on June 30, 2025.
https://tax.news/URL/portugal-vat-reduction-sustainable-energy-2025#EnergyPolicy #VATReduction #Sustainability #TaxPolicy #GreenTech #Portugal
