Tax benefits for the operation of photovoltaic systems

The use of renewable energies is becoming increasingly important. To promote the expansion of photovoltaic systems, the legislature has now introduced extensive changes for operators of photovoltaic systems as part of the Annual Tax Act 2022.

Numerous bureaucratic hurdles will be removed. The new regulations will make the operation of photovoltaic systems more attractive and simpler from a tax perspective. These affect both income tax and sales tax. The financing of PV systems has also been taken into account.

The most important changes at a glance:

• Automatic tax exemption for smaller photovoltaic systems
• Tax exemption applies in part retroactively as of 2022
• Attractive conditions for financing PV systems

Read the details and what to look out for.

Fiscal changes for photovoltaic operators

What changes for operators of smaller photovoltaic systems?

Previously, operators of smaller photovoltaic systems had to apply to have income tax coverage waived.

Now, income from the sale of solar power and the private use of the power for self-supply are automatically exempt from income tax if

• the gross output of the system does not exceed 30 kilowatts per residential unit or commercial unit on single-family homes and commercial properties, and 15 kilowatts per residential unit or commercial unit on other buildings (e.g., multifamily or mixed-use properties)
• and the output of all PV systems of the operator or joint venture does not exceed a total of 100 kilowatts.

The tax exemption is mandatory, there is no right to choose. It applies completely independently of the use of the generated electricity.

Important to know:

• The tax exemption applies to both existing systems and newly constructed photovoltaic systems retroactively to January 1, 2022!
• If the aforementioned output limits are exceeded, the operator continues to generate taxable income from a commercial enterprise and must declare this as part of the income tax return.
• The tax exemption also applies to existing plants, irrespective of whether the previous option to waive income tax reporting was used or not.

Can operators of photovoltaic systems continue to claim expenses for tax purposes?

Due to the tax exemption, as a rule all expenses associated with the photovoltaic system can no longer be claimed for tax purposes from the 2022 assessment period. Depreciation and special depreciation will also cease retroactively from 01.01.2022.

In the private sector, a tax reduction for craftsman services in private households or – to a limited extent – also the tax reduction for energy measures in buildings used for own residential purposes may still be considered in the future.

How is the business tax for operators of photovoltaic systems regulated?

In principle, the operation of a photovoltaic system constitutes a commercial activity that is subject to trade tax. However, operators are granted an allowance of €24,500 per year if the system is operated by a natural person or partnership.

From 2022, there will also be a tax exemption for business tax for systems, especially on residential buildings or garages, up to an installed capacity of 30 kilowatts.

What are the new sales tax regulations?

Effective January 1, 2023, the sales tax rate for the supply and installation of solar modules, including the essential components of a storage system, has been reduced to 0%.

Preconditions:

• The delivery is made to the operator of the photovoltaic system
• and the photovoltaic system is installed on private residences, public buildings or other buildings serving the public good.

This precondition is automatically considered to be met if the installed gross capacity does not exceed 30 kilowatts.

Thus, in these cases, it will no longer be necessary to waive the small business regulation for entrepreneurs in the future, and the associated administrative burden of submitting advance sales tax returns will no longer apply. Whether the application of the small business regulation is possible in principle must be examined in each individual case.

Balcony power plants are generally exempt from VAT as so-called “mini solar plants”. However, this does not apply to mobile solar modules.

Attractive conditions for financing photovoltaic systems and battery storage.

The legislator has also introduced measures for financing these projects. The Kreditanstalt für Wiederaufbau (KfW) offers loans for photovoltaic systems (rooftop/façade) and for battery storage. Applications are submitted via the company’s bank.

Individual federal states also grant subsidies.

As mentioned above, the sales tax on the supply of photovoltaic systems has been waived since January 1, 2023, if they are installed on or near a residential building.