BDO clarifies tax treatment of photovoltaic systems in Germany

BDO AG, a German auditing and consulting firm, has outlined new tax regulations affecting photovoltaic (PV) systems. The changes, stemming from the Annual Tax Act 2022 and recent federal finance ministry circulars, aim to support the country's energy transition by simplifying tax obligations for PV system operators.

A key change is an income tax exemption, retroactively effective from January 1, 2022, for income derived from operating certain PV systems. This exemption applies to both feed-in tariffs and electricity consumed by the operator. Furthermore, effective January 1, 2023, a zero VAT rate has been introduced for the supply and installation of specified PV systems.

The tax exemption applies to systems installed on single-family homes (including garages or carports) with a gross capacity of up to 30 kWp. For other buildings containing multiple residential or commercial units, the limit is 15 kWp per unit. The total installed capacity across all systems operated by a single taxpayer or partnership cannot exceed 100 kWp.

BDO clarified that the exemption covers various income streams, including feed-in payments, sales to tenants, and electricity provided for charging electric vehicles. However, related operating expenses are generally not deductible. The firm noted that these new rules, including simplified registration and reporting, are designed to streamline the process and encourage the adoption of solar energy in Germany.