Pa Daly (Kerry, Sinn Fein)
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170. To ask the Minister for Finance if individual homeowners with over 20 solar panels are under an obligation to pay tax on any refund from energy companies over €400 of electricity that they export onto the grid; and if he will make a statement on the matter. [26467/25]

Pa Daly (Kerry, Sinn Fein)
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171. To ask the Minister for Finance the tax rules on microgeneration from solar PV; and if he will make a statement on the matter. [26468/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 170 and 171 together.

Micro-generation of electricity is the small-scale production of electricity by consumers who generate electricity at their own homes for their own consumption and sell the excess electricity produced to the grid.

Section 216D of the Taxes Consolidation Act 1997 provides that profits of up to €400 per year arising to an individual from the generation of electricity from renewable, sustainable or alternative sources of energy at the individual’s sole or main residence for the individual’s own consumption (referred to as the micro-generation of electricity) is exempt from Income Tax, USC and PRSI. The profits which are exempted are those profits arising from the domestic generation of electricity which is supplied to the national grid.

A person engaged in the microgeneration of electricity is, subject to the exemption outlined above, taxable each year on their profits/gains from the sale of electricity as calculated under Schedule D Case I or Case IV, as the case may be. Profits arising from the carrying on of a trade are chargeable to tax under Case I whereas profits generated from activities which do not have the characteristics of a trade are chargeable to tax under Case IV. Only profits/gains chargeable to tax under Case IV are eligible for the tax exemption.

Revenue advise that generally, profits arising from the microgeneration of electricity by private individuals in a domestic setting are liable to tax under Case IV on the basis that the individual is not trading or in the business of generating electricity for sale or supply. There is no specific provision in the tax code setting out allowable or disallowable costs when calculating Case IV profits. However, in determining the profit element of the income from the microgeneration of electricity, it is Revenue practice to allow a deduction for incidental costs directly associated with the microgeneration of electricity profits. A deduction is allowed for any expenses of a revenue nature (for example, costs of repair and maintenance of equipment) incurred wholly and exclusively in generating the profits. No deduction is allowed for any capital expenditure incurred (for example, the cost of purchasing and installing the solar panels). Additionally, capital allowances are not available in relation to such expenditure as the profits do not arise from the carrying on of a trade.

Finally, Revenue further advise that there is no requirement for individuals to include the exempt profits in an income tax return. However, where the calculated profit from micro-generated electricity for a tax year is in excess of the exempt amount of €400, that excess must be declared on an income tax return and will be subject to income tax, USC and PRSI in the usual manner.

Guidance on the tax treatment of profits arising from the microgeneration of electricity are available on the Revenue website at: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-07/07-01-44.pdf.