Are you considering installing a photovoltaic system, or have you already installed one? We set out the tax consequences that arise and what you need to bear in mind in each case. We assume that you sell the electricity generated to an energy supplier. To do so, you enter into a contract with the energy supplier. Since 1 January 2009, new installations must be registered with the Federal Network Agency (Bundesnetzagentur) (www.bundesnetzagentur.de).
1. General
By operating a photovoltaic system, you become an entrepreneur within the meaning of the VAT Act (Umsatzsteuergesetz). Even for small installations, it is advisable to opt for VAT liability. In this case, the tax office (Finanzamt) will refund you the VAT (value added tax) on the purchase price of the system, so that you only need to finance the net amount.
Example: Purchase price of the system: 35,700 EUR (including 5,700 EUR VAT) You receive the amount of 5,700 EUR refunded by the tax office.
The energy supplier transfers the VAT to you in addition to the statutory feed-in tariff (Einspeisevergütung). You must report this VAT to the tax office and pay it to the tax office.
Example: Monthly feed-in tariff (net): 200 EUR VAT: 38 EUR Monthly income: 238 EUR
The energy supplier transfers 238 EUR to you, of which you pass on 38 EUR to the tax office.
If you were to opt for the small business regulation (Kleinunternehmerregelung) without VAT, which would not be advisable, the procedure would be as follows:
You pay the purchase price for the system of 35,700 EUR, without the tax office refunding the VAT of 5,700 EUR. The energy supplier transfers only the net monthly feed-in tariff to you, i.e. 200 EUR. In this case, you would not need to remit VAT to the tax office. Compared with the VAT liability option, you would therefore receive 5,700 EUR less.
Operating a photovoltaic system is generally subject to trade tax (Gewerbesteuer). For small installations (e.g. a photovoltaic system on the roof of a detached house), the annual profit does not exceed the trade tax allowance of 24,500 EUR, so no trade tax is payable. Many towns and municipalities waive the requirement to register as a business for small installations.
The profit from the photovoltaic system is subject to income tax (Einkommensteuer). For externally financed systems, tax losses typically arise in the first few years. These can be offset against other income and reduce your income tax liability.
2. Process
We can relieve you of many tax obligations:
- Registration of the photovoltaic system with the tax office.
- Monthly VAT advance returns for the first two years.
- Annual VAT return.
- Annual income-surplus calculation (Einnahmenüberschussrechnung) (profit calculation) with an asset register.
3. Important Notes
Please bear the following in mind:
- For the tax office to actually refund the VAT from the purchase of the system, you need a tax-compliant invoice from the system installer. We check this invoice for you to ensure tax compliance.
- If you are self-employed and currently applying the VAT small business regulation (Kleinunternehmerregelung), operating the photovoltaic system may under certain circumstances result in your other income also becoming subject to VAT. We will show you how to avoid this.
4. Tax Minimisation
In the annual profit calculation, you may deduct, amongst other things, the following business expenses in connection with the photovoltaic system:
- Interest
- Depreciation (AfA - Absetzung für Abnutzung)
- Maintenance, repairs
- Insurance
- Tax adviser fees
A photovoltaic system is depreciated over a tax useful life of 20 years. You may choose between various depreciation methods and in some cases combine them:
- Straight-line depreciation (lineare Abschreibung)
- Investment deduction amount (Investitionsabzugsbetrag)
- Special depreciation under Section 7g EStG (Income Tax Act)
By making optimal use of these tax options, we can minimise your tax burden.
5. Fees
We offer our services in connection with the photovoltaic system for a fixed fee in accordance with Section 14 of the Tax Adviser Remuneration Ordinance (Steuerberatervergütungsverordnung).