Sale of surplus energy produced for self-consumption, more simplified
The new legislation, approved by the Council of Ministers in November and published in Diário da República on December 21, 2022 intends to alleviate the bureaucracy associated with the sale of surplus electricity production in installations for self-consumption.
What are UPAC and how do they work
UPAC is the acronym that designates (Production Units for Self-Consumption through photovoltaic solar systems. However, the production of electrical energy in this system is not constant throughout the day, varying with the availability of solar radiation, temperature exterior, among other factors.
For the self-consumer to make the most of the system, they must connect the consumer equipment taking into account the production in that time interval or store it using batteries, later using this energy in hours of lower or non-existent production, thus avoiding consume the energy that comes from the electricity grid (RESP), which is then billed by the supplier.
In UPACs where there is no electrical energy storage, when production exceeds consumption, “surplus electrical energy” is generated and delivered to the electrical grid.
This surplus electrical energy can be delivered free of charge to the electrical grid or sold through electricity markets, namely organized markets, bilateral contracts or peer-to-peer trading schemes, directly or through third parties (see the list of companies).
However, few self-consumers sold this surplus, as selling it required them to: Open an activity with the Tax Authority; Send invoices to the company that purchases excess electricity; Pay VAT on the invoiced amount.
New legislation and procedures
From now on, anyone who has photovoltaic solar panels at home with an installed power of 1 MW or less, and produces electricity for self-consumption, will no longer be required to pay VAT if they sell surplus production to the grid. This determines “the application of the VAT reverse charge mechanism to the supply of electricity to a taxable reseller until December 31, 2026”.
With the aim of encouraging domestic consumers in Portugal to invest in the production of renewable energy for their own consumption, the new law, in addition to exempting from IRS taxation, revenue from the sale of surplus to the public service network that does not exceed 1,000 euro per year, it also allows transferring to those who purchase energy the obligations of: VAT settlement; billing and communication of invoices.
In this way, the self-consumer no longer has the need to open an activity with the Tax Authority, receiving only the amount invoiced by the company that buys the excess electricity.
It is also defined that, within the scope of the activity of producing electricity from renewable energy for self-consumption, the sale of surpluses to the public service electrical network with installed power equal to or less than 1 MW "is compatible with the exercise of functions on an exclusive basis, whether this is legally or contractually imposed, or whether it is at the option of the interested party"