Due to the question of how to solve the climate crisis in the future, the question arises to what extent the legislator offers incentives to promote the self-imposed target of reducing greenhouse gases to minus 65% by 2030 compared to 1990. This poses particular challenges for society and the Federal Government. Both in terms of income tax and sales tax, it is important to set targeted incentives for sustainable investments in order to achieve the target set. One example of this is the taxation of electricity inputs from photovoltaic systems.

1st Sustainable Investment – Introduction

Legislators have already enshrined some meaningful incentives in law to make money-intensive spending on climate-promoting measures more attractive and to make this possible for everyone. For this purpose, legal foundations have already been established in the field of photovoltaic systems, e-mobility and energy measures for buildings used for own residential purposes that pursue this purpose.

Sustainable investment in photovoltaic systems

2.1.Income tax advantages of a PV system

To generate climate-neutral electricity, for example, you need your own photovoltaic system. This is cost-intensive and entails operational and entrepreneurial use. Therefore, this investment does not seem very attractive.

The income from the feed-in of electricity generally constitutes income from business and is therefore subject to income tax. For this purpose, the legislature introduced an exemption of revenue pursuant to § 3 no. 72 EStG. This provides all income tax-free that is related to the operation of a photovoltaic system. The condition for this is that the output of the plant per residential or commercial unit does not exceed 30 kilowatts and the total output of the total plant operated does not exceed 100 kilowatts per taxable person or company.

Basically, you also have to make a profit determination for the operation. These are established either by a surplus income statement or, if the turnover or profit limit is exceeded, by a business asset comparison. In the case of an exemption of income, the determination of profit is also omitted. In addition, the exemption confers a further advantage, since the operation of the photovoltaic system within the framework of the conditions described in § 3 no. 72 sentence 1 EStG does not lead to a colouring effect (for partnerships operating in asset management otherwise).

2.2 Sales tax advantages of a PV system

In addition, small business owners are allowed to treat the electricity of their photovoltaic systems tax-advantageously. Since 01.01.2023, the delivery of such a plant is taxed at 0% tax rate. This leads to a massive relief for non-enterprises and small businessmen, who are not entitled to deduct input tax. As a result, the non-deductible/deductible input tax does not burden the investment (19 % savings). In addition, a small business owner is no longer obliged to submit an annual VAT return from 01.01.2025. In the case of the small business regulation, only the turnover limit of EUR 25,000 in the previous year and EUR 100,000 in the current year must be observed. This is of no great relevance, since if the income tax-given limit of 30 kilowatts of power is adhered to, the sales limit can hardly be exceeded.

Sustainable investment in the use of cars

3.1. Sustainable investment: operational passenger car (1% method)

The e-car is a tax incentive for sustainable investment. In the case of operationally used cars, one must tax a private removal for the private share. This is estimated at 1% of the gross list price per month for fuel-only vehicles if the operational use is above 50%. A fully electric vehicle is valued at only 1⁄4 of the gross list price. However, this only applies to cars whose gross list price is a maximum of EUR 70,000. If the top tax rate of 45 % is applied for a car with a gross list price of EUR 70,000, the tax saving for an electric vehicle is EUR 2.825 per year compared to a car with an internal combustion engine (EUR 70,000 x 1 % x 12 months x 45 % = EUR 3.780 compared to EUR 3.780 x 1⁄4 = EUR 945); EUR 3.780 – EUR 945 = EUR 2.825).

3.2. Sustainable investment: operational passenger car (travel book)

For a 50% operational use or less, only one use of a logbook is used. Here, the tax treatment of private extraction is similar to that of the 1% method, in that the expenses are only 1⁄4 compared to conventionally driven vehicles and the private extraction is taken into account in the ratio of private kilometres to total kilometres.

3.3. Sustainable investment: privately used company cars (workers)

The same applies to employees who are also allowed to use their service vehicle privately. The evaluation of private use is analogous. Therefore, there is the same tax savings for employees as described above.

Sustainable investment in energy measures

4.1. Incentives for modernisation/more efficient use of owner-occupied real estate

Another sustainable investment is the energy measures for buildings used for own living purposes. There, energy improvements are made tax deductible. The incentive here should be to improve the property to the extent that emissions decrease and the operating costs of the own property decrease.

This tax advantage is anchored in § 35c EStG. This should favour investments in a property at least 10 years old. The investments concerned are exemplary in the thermal insulation of walls, roof areas and floor ceilings, the renewal of windows and external doors and some other areas (final list in § 35c EStG).

4.2 Requirements for use

There is no tax reduction for such expenses if it is already operating expenses, advertising costs, special expenses or exceptional charges.

The tax deduction is made by reducing the collective income tax of a total of 20% of the expenses incurred. This 20 % is made up, on the one hand, of 7 % of the expenditure in the year of the energy measure and the following year. A further 6% are deductible in the year after next (7% in the first, 7% in the second and 6% in the third = 20%). Expenditure is deductible up to EUR 40,000 per beneficiary object. Expenditure for an energy consultant can be claimed in the amount of 50%.

Another condition for this is the execution of the measure by a specialist contractor with a correspondingly completed certificate. In addition, the property may be used exclusively for own residential purposes. A part of the apartment partly provided free of charge is harmless.

The tax authority only considers the expenses if there is an invoice and proof of payment that meets the requirements.

Sustainable Investment with Tax Benefits – Conclusion

Finally, the legislator gives scope for sustainable investments and thus promotes its own energy production, energy savings and emission-free transport. However, this is subject to various conditions and entails a high level of bureaucracy (see Chapter 4: Sustainable investment in energy measures). Thus, it can be said that there are tax incentives for sustainable investment in climate protection. However, these are partly linked to many prerequisites and can hardly be feasible without professional advice for a tax layman.