The sale of the generated electricity to a network operator creates a commercial activity for you. Thus, your installed photovoltaic system (PV system) represents operating assets. This means that you are immediately faced with several problems and questions. Both in terms of income tax law, it is important to pay attention to the division of operations, especially in the case of leased properties, and to take into account the problem with sales tax.

For the tax assessment of a PV system, it is fundamentally important to use the photovoltaic system (PV system). It is important whether the PV system is held in private assets or in operating assets and what specific use is available here.

2. Taxation of a PV plant

2.1. Tax assessment of a PV system

If you own a PV system and generate electricity with it, then you have two options: use the electricity yourself or have it fed in via a grid supplier and thus sell it.

Here, the first case of self-use of the electricity is tax-free, since it does not trigger a tax event.

In the second case, however, there is a commercial activity which is taxable. This results from the fact that by selling the electricity to a network operator all the factual characteristics of a commercial operation are present. The PV system thus regularly represents operating assets.

2.2. Power generation by PV system as a business

A business enterprise is an independent, sustainable activity with the intention of making a profit. Self-employed means that the PV system is built at your own initiative and risk. Sustainability arises through a more than one-off exercise of activity. Finally, the profit intention must also be affirmed, as a total profit forecast (estimated over several years) will generate a profit from the PV plant. Furthermore, participation in general economic transport is also regular.

Therefore, this means that the revenues from the sale of electricity to the network operator are included in the income from commercial operations. Therefore, use the plant G for commercial operations and the associated plant EÜR for profit determination. Only from an annual profit (before taxes) of more than EUR 60,000 would accounting take effect. Before this, a simple profit determination as a surplus income statement (EÜR) is sufficient.

2.3. New regulation for control-free PV systems up to 10 kW

While in principle all PV systems establish a commercial operation, the BMF letter of 02.06.2021 introduced protection. Only from a power of 10 kW can the corresponding PV systems also be assumed to be profitable. All plants that do not reach this limit therefore do not establish a commercial operation.

If you rent a property together with your spouse or relative, you must pay particular attention to the fact that the purchase of the PV system has no negative impact on the property. This only applies if the PV system is installed on the rented property or connected to it. This already results in a link between the PV system and the property.

3.1. Creation of spouse GbR’s by joint activity

Imagine that you and your spouse rent a property together and receive income from rental and lease. By setting up a PV system on the roof of the rented property, you also sell electricity to your local grid provider, which, as explained, justifies income from commercial operations. The PV system was also jointly purchased here by both spouses.

Both the rented property and the PV system have a typical spouse GbR. A GbR does not need a social contract to be founded and is usually justified solely by a joint purpose (here: rental, electricity generation).

3.2 Emergence of an operating split

The problem we are facing here is the division of operations. The income from rental, which belongs to private assets, becomes here with a division of operations to business assets or these incomes now belong to the business operation. This results in two major disadvantages: On the one hand, the income would be subject to trade tax and on the other hand, a tax-free sale after 10 years for the property is eliminated – this must be avoided.

By placing the PV system on the roof of the rented property, we have a material connection here. Because of the two spouse GbR’s – one for rental and one for the PV system – there is also a personal connection here: The shareholders can jointly exercise their willingness to act in both GbR’s. This results in a complete operating split.

However, here the Wiesbadener model could achieve an avoidance of the division of operations. Instead of both spouses being 50% involved, one spouse owns the rental property 100% and the other spouse the PV system 100%. An operating split can thus no longer be achieved.

Specialised consultancy for

Division of operations?

4th VAT on PV systems

The income tax commerciality of the PV system is often accompanied by the sales tax business characteristic. In many cases, this can even occur earlier, since the sales tax entrepreneur status does not presuppose a profit intention, but only a revenue intention. This means that the sales tax entrepreneur status can remain even in the event of losses.

Thus, the sale of the generated electricity to the network operator triggers the sales tax. Since you usually do not write an invoice to the network operator, but he sends you a credit, some special features apply to sales taxation. First, you owe the tax office the sales tax shown. At the same time, however, the network operator also transfers the gross amount of the credit. So you are obliged to declare the sales tax by VAT registration and pay it to the tax office.

In the case of self-consumed electricity, this is of course somewhat different. Because in such cases there is a so-called free value tax. However, this still applies regular sales tax.

4.1. Small business regulation for the PV system

In many cases, of course, you want to avoid sales tax completely. This can be achieved with the small business regulation according to § 19 UStG. A statement to the tax office will no longer impose VAT on small business owners. The prerequisite for this is that the gross income in the previous year was less than EUR 22,000 and does not exceed EUR 50,000 in the current year.

But beware: If you still have other business assets (for example, a sole proprietorship; not a partnership or corporation), this business assets would have to be added to the business assets of the PV system under VAT law, which applies in particular to the income generated here. Under certain circumstances, this could remove the abovementioned limit for the small business regime.

5th trade tax on PV systems

In addition to income tax, commercial enterprises – as well as the PV plant – are subject to trade tax. This additional burden primarily affects corporations (e.g. GmbH, AG) and fewer sole proprietors or partnerships in the case of low profits. The trade tax provides for an allowance of EUR 24,500 for individual companies and partnerships.

In many cases, the tax office will also not request a trade tax return if the profit is obviously below the allowance – this applies here, of course, only to individual companies or partnerships.

Should trade tax still apply beyond the allowance, it can also be counted against income tax and thus reduce the income tax burden.