Tax regulation mechanisms II (Value-added tax reduction)

Updated: 07.02.2019

Author: Helena Vidalic

In France, the purchase of commodities is subject to a reduced VAT rate if they are related to investments in the improvement, the transformation, the fittings, the conservation or certain equipment of buildings constructed more than two years prior (Code Général des Impôts, art. 279-0 bis, 1). Thus, the purchase of such commodities by private individuals is indirectly promoted. 

This incentive was introduced by Finance Act 2000 (Loi n° 99-1172, Art. 5) and amended by subsequent annual Finance Acts. Loi n° 2000-1352 (art. 67) introduced the tax credit (Crédit d'Impôt) for renewable energy sources and made them eligible for a reduced VAT rate of 7%. This tax incentive is subject to a multitude of non-legislative standards. 

  • From 1 January 2014, the reduced VAT for photovoltaic installations was increased from 7% to 10% (art.21, Loi de finances rectificative pour 2013). 

The reduced VAT rate applies to services, equipment and delivery (BOI-TVA-LIQ-30-20-90-20-20140929). In order for the equipment to be eligible, it shall be delivered and installed by the same company (either directly by this company or by a sub-contractor), and the equipment and the installation works shall be listed on the same invoice (BOI-TVA-LIQ-30-20-90-20-20140929). 

Eligible technologies

The following renewable energy technologies are eligible: solar energy installations, wind energy plants, hydro-power plants and biomass plants (BOI-TVA-LIQ-30-20-90-20-20140929).

Wind energy

Eligible (BOI-TVA-LIQ-30-20-90-20-20140929)

Solar energy

Eligible (BOI-TVA-LIQ-30-20-90-20-20140929) with the following restrictions: 

  • Installations shall be designed to cover the electricity needs of a building (installations that generate up to 3 kW per housing unit or do not cover more than 30 m²). Larger installations are eligible for a tax reduction for the first 3 kW of electricity produced; electricity exceeding this amount is subject to the regular VAT rate.
  • The invoice shall show the different VAT rates separately. 


Eligible (BOI-TVA-LIQ-30-20-90-20-20140929)


Eligible (BOI-TVA-LIQ-30-20-90-20-20140929)


  • On the French mainland and in Corsica, the reduced VAT rate is 5.5% (Art. 279 bis, Code Général des Impôts).
  • In the overseas departments and regions (DOM-ROM) of Guadeloupe, Martinique and Réunion, the VAT amounts to 2.10% (Art. 296, Code general des Impôts)
  • From 1 January 2014, the reduced VAT for photovoltaic installations was increased from 7% to 10% (art. 21, Loi de finances rectificative pour 2013). 


The reduced VAT rate applies to investments made by the owner of a building, a co-owner syndicate (syndicat de copropriétaires), a tenant or his representative (Code Général des Impôts, arts. 279-0 bis, 3). This means that every natural person or legal entity may be granted a VAT reduction as long as all obligatory prerequisites are met. Legal entities involved in business activities are not eligible for the reduced VAT rate, as they have to pay input-VAT, which may be deduced from the VAT they charge. Thus, the VAT is a pass-through item.


Process flow

  • Confirmation of entitlement. The client ordering deliveries and services subject to the reduced VAT rate shall confirm in writing that the building in question was completed more than two years ago (Code Général des Impôts, arts. 279-0 bis, 3).
  • Plant delivery and installation. Having received this confirmation, the company assigned shall carry out the services related to the delivery and installation of the renewable energy plant. In order for the reduced VAT rate to be applicable to both the services and the cost of materials, the materials shall be purchased and installed by the same company or its sub-contractor (BOI-TVA-LIQ-30-20-90-20-20140929). 

Distribution of costs


The reduced VAT rate for renewable energy plants leads to a lower state revenue, which is compensated for by other revenue.


Further information

  • Ministère de la Tansition écologique et solidaire - Ministry of the Ecological and Inclusive Transition
  • +33 14 081 212 2
  • website