New Rules on Tax Exemptions for Photovoltaic Systems
On July 17, 2023, the Federal Ministry of Finance (BMF) published a letter explaining the application of Section 3(72) of the Income Tax Act (EStG). These provisions apply to individuals, partnerships, and corporations. The most important provisions from this letter are explained in more detail below.
How is the output of a solar power system measured?
The output of a solar system is measured in kilowatts (kW). This is important for determining whether the system is eligible for certain benefits. The gross output as recorded in the market data registry is always used as the basis. Furthermore, it is irrelevant, for example, whether the system is derated or where it is located on the roof.
Which solar systems are eligible for tax benefits?
Under certain circumstances, the purchase or operation of solar systems may qualify for tax benefits, but only if they are operated with the intent to generate a profit. For example, if the electricity generated is sold. They must also be installed on, in, or attached to a building. This can also include a garden shed or a garage. There are specific limits on the size of the system, depending on the type of building.
What does the tax exemption mean?
The tax exemption means that you do not have to pay taxes on the money you earn from the solar system. Similarly, you do not have to pay taxes on the electricity you use yourself.
How do you check if the system is the right size?
You must verify that the system is the correct size for the building on or attached to which it is installed. Different building types (e.g., single-family home vs. multi-family home) have different peak power limits that the system must not exceed. This is referred to as the “property-specific maximum output.” Only systems whose output complies with the guidelines are eligible for tax benefits.
In a second step, the “person-specific maximum output” is checked: This is referred to as the 100 kW (peak) limit.
What is the 100 kW limit?
The 100 kW limit is a rule stating that one may not own more than 100 kW of peak power from solar systems in order to qualify for the favorable tax treatment.
What is the ban on deducting operating expenses?
Since 2022, certain costs for solar systems can no longer be deducted from taxes in the case of a tax-subsidized system. This applies to all operating expenses that are directly economically related to the (potentially future) operation of the eligible photovoltaic systems.
Simplification rule for tax relief
There is a rule that makes it easier to apply for tax benefits for solar systems. This rule states that you do not necessarily have to generate profits to receive these benefits.
What you need to do
These new rules are intended to help promote solar systems in Germany and support the use of renewable energy. If you have a solar system or are planning to install one, it is advisable to look into the topic in detail.
We’re happy to assist you. Our team can help with any questions regarding tax breaks for photovoltaic systems. We have direct points of contact in Düsseldorf and Oberhausen. Contact us to schedule a consultation. We look forward to meeting you.
