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Information Oberfinanzdirektion Karlsruhe

Zero tax rate for sales in connection with photovoltaic systems as of January 1, 2023

As of January 1, 2023, the VAT rate is reduced to 0 percent for the supply of solar modules to the operator of a photovoltaic system, including the components essential to the operation of a photovoltaic system and the storage devices used to store the electricity generated by solar modules. Further, the application of the zero tax rate requires that the photovoltaic system be installed on or near private residences, apartments, and public and other buildings used for activities serving the public good (Section 12 (3) Sentence 1 of the Value Added Tax Act - UStG). This requirement is deemed to be met if the installed gross capacity of the photovoltaic system does not exceed or will not exceed 30 kW (peak) according to the market master data register.

This new regulation serves to reduce bureaucracy for operators of photovoltaic systems. Due to the zero tax rate, operators can apply the small business regulation without suffering any financial disadvantages. The input tax deduction as a reason for waiving the small business regulation no longer applies, because the supply of photovoltaic systems (including the components essential for operation and the storage units) is no longer subject to sales tax.

The Federal Ministry of Finance provides a comprehensive statement on the new legal regulation in Section 12 (3) UStG in a BMF letter dated 27.02.2023.

With the sustainable feeding of electricity into the power grid, the operator of a photovoltaic system is an entrepreneur within the meaning of the UStG. If the requirements of the small business regulation (§ 19 UStG) are met, VAT is not levied on the feed-in tariff and no VAT is levied on the privately consumed electricity either. Please inform the grid operator that you are a small business owner. Only then can he invoice the feed-in tariff correctly.

Entrepreneurs must always notify the tax office of the start of a gainful activity. The BMF letter on the tax registration of operators of certain small photovoltaic systems dated 12.06.2023 has introduced simplifications in this regard for reasons of reducing bureaucracy. According to this letter, the tax notification on the commencement of gainful employment (Section 138 (1) of the German Fiscal Code - AO) and the transmission of the questionnaire on tax registration (Section 138 (1b) AO) to the competent tax office can be waived if

  • the operators of PV systems are tradesmen within the meaning of § 15 EStG whose business is limited to the operation of photovoltaic systems benefiting under § 3 number 72 EStG,
  • the business is limited exclusively to the operation of a photovoltaic system within the meaning of § 12 (3) no. 1 sentence 1 UStG
  • and the small business regulation according to § 19 UStG applies.

This applies, for example, to operators of photovoltaic systems

  • who install the photovoltaic system on an owner-occupied single-family house,
  • the installed gross capacity of the photovoltaic system will be up to 30 kW (peak)
  • and the operator does not achieve more than 22,000 euros total turnover (gross) in a calendar year.

If the total annual turnover of the company exceeds or is expected to exceed the turnover limit of 22,000 euros (§ 19 paragraph 3 UStG), the gainful activity must be declared for tax purposes. In this case, sales tax is incurred for the feed-in tariff, which must be declared and paid in the sales tax returns. However, private electricity consumption is not subject to VAT even in this case.

Further information on the operation of a photovoltaic system can also be found on the website of the Federal Ministry of Finance in the FAQ section.

Special features for existing systems (acquisition/commissioning until December 31, 2022)

The introduction of the zero tax rate as of January 1, 2023, does not fundamentally change anything for existing systems in the area of sales tax. The originally chosen form of taxation can continue to be applied with all the regulations that have already been in place (cf. on sales tax for smaller photovoltaic systems and combined heat and power plants).

In the past, operators of photovoltaic systems usually waived the application of the small business regulation, assigned their photovoltaic systems to their business and made a full input tax deduction. As a result, the privately consumed electricity then had to be taxed as a so-called free transfer of value. In principle, this continues to apply.

In order to avoid a future turnover taxation of the privately consumed electricity, the photovoltaic system can be withdrawn. The withdrawal is subject to the zero tax rate if the photovoltaic system meets the requirements of Section 12 (3) UStG. This is the case, for example, in the case of a withdrawal of a photovoltaic system with an output of up to 30 kW (peak), which was erected on one's own single-family house. The photovoltaic system can only be withdrawn as a whole.

A withdrawal is possible if the object is no longer used for the purposes of the company in the future. For photovoltaic systems, this applies if more than 90 percent of the electricity generated is expected to be used for private purposes in the future. For reasons of simplification, this is to be assumed in particular if part of the electricity generated by the photovoltaic system is stored in a battery, for example. The same also applies if the electricity generated is not only occasionally used to charge a private electric vehicle or to operate a heat pump in a private household.

The withdrawal of a photovoltaic system covered by the above-mentioned simplification rule constitutes a right of choice of the operator. The exercise of this option must be documented by the operator (withdrawal declaration to your competent tax office).

The withdrawal of the photovoltaic system must also be stated in the VAT returns. In the advance VAT return you enter it in code number 87 and in the annual VAT return in code number 158 with the replacement value of the system at the time of removal.

If you have waived the application of the small business regulation in the past in order to obtain the input tax deduction from the acquisition of the equipment, you are subject to the standard taxation for at least 5 calendar years. During this period, the VAT for the feed-in tariffs that you receive from the grid operator must be declared in the VAT returns and paid to the tax office. Even after the photovoltaic system has been removed, you can claim an input tax deduction for supplies or other services for the photovoltaic system (e.g. repairs) that are not subject to the zero tax rate. A deduction is only possible on a pro rata basis and to the extent of the actual business use. The share of business use assumed for the withdrawal is then no longer decisive.

If you wish to return to the small business regulation after 5 calendar years, please remember to inform your network operator of this in good time. In the case of small businesses, sales tax is not levied on the feed-in tariff. However, if it is shown separately in a credit note from the grid operator, you must pay it to the tax office.

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