30 kWp presumption rule – tax rate with 0% VAT on solar systems – input tax deduction option for solar systems

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A '0% tax rate' differs from a tax exemption in that the supplier does not charge VAT on the consideration for their service (e.g., sale), but can claim full input tax deduction for all input services (e.g., purchases) related to their service.

Zero rate only applies to services provided to operators or end customers

End customer = customer for whom a product or service is ultimately intended, also called consumer.

The reduction of the tax rate to 0% applies only to services provided to the operator of the photovoltaic system (generally the end consumer or private household). Deliveries from manufacturers, wholesalers, or retailers to individuals and companies that are not operators of the photovoltaic system remain subject to the standard tax rate.

The application of the 0% tax rate is limited to the following services (according to § 12 para. 3 UStG):

• Delivery of solar modules, including all components necessary for the operation of a solar power system, as well as energy storage systems, to the operator of the solar power system. This applies if the solar power system is installed on or near private residences, apartments, and public or other buildings used for activities serving the common good.
• The intra-Community acquisition of eligible goods.
• The import of eligible parts.
• The installation of subsidized facilities and electricity storage systems.

19% tax rate: Application example for companies

Purchase of a solar module from a wholesaler. The solar module costs €120 net at the wholesaler. (Gross invoice amount from the wholesaler = €120 + €22.80 / 19% VAT)

This results in input tax (19%) of €22.80 (from the purchase price of €120) for the purchasing retailer.

The retailer now sells the solar module to the end customer for €160 net, plus 19% VAT. This totals €190.40 (including €30.40 from 19% VAT).

The sales tax is therefore stated on the invoice that is issued when a sale or service is completed, while the input tax is noted on the invoice for the purchase.

The retailer therefore incurs a tax liability of €30.40 minus the €22.80 input tax that was previously paid to the wholesaler.

This leaves a remaining tax debt of €7.60.

This must be reported to the tax office in the next VAT return, which will then be collected by the tax authorities.

0% tax rate: Application example for companies

Purchase of a solar module from a wholesaler. The solar module costs €120 net at wholesale.

This results in input tax (19%) of €22.80 (from the purchase price of €120) for the purchasing retailer.

The retailer now sells the solar module to the end customer for €160, taking into account the 30 kWp presumption rule. Therefore, the customer will not be charged any additional taxes. The VAT is 0% and €0.

Sales tax is a so-called consumption tax. It is also called 'value-added tax'.

The retailer is now entitled to a VAT refund, which was previously paid to the wholesaler.

The input tax of €22.80 already paid to the wholesaler can be reclaimed from the tax office via the next VAT return.

Many businesses are required to submit preliminary VAT returns monthly or quarterly, among other things to report and pay VAT already incurred to the tax office or to receive a refund in the case of a VAT surplus. In the final VAT return at the end of a calendar year or a possibly shortened period, the VAT prepayments already made are credited.

Meaning and purpose

Value-added tax (VAT) is an annual tax. Submitting preliminary VAT returns reduces the risk of payment defaults for the government and provides it with an interest advantage. It also allows businesses to spread their VAT burden more evenly throughout the year, thus avoiding payment difficulties at the beginning of the following year. Conversely, businesses benefit from an interest advantage when receiving VAT refunds.

Period, deadline and extension of deadlines

The filing period for preliminary VAT returns is generally based on the previous year's VAT liability. The tax office determines the filing obligation; if the filing period changes, the business owner will be notified. The standard filing period is the calendar quarter. However, if the previous year's VAT liability did not exceed €1,000, the tax office may exempt the business owner from the obligation to file preliminary returns and make advance payments for the following calendar year. If the previous year's VAT liability exceeded €7,500, preliminary VAT returns must be filed monthly in the following year. Newly established businesses must always file monthly preliminary returns for the first two years (Section 18 Paragraph 2 of the German VAT Act).

If the total surplus from refunds exceeds €7,500, the business owner may voluntarily submit monthly preliminary VAT returns. With the exception of this regulation, the filing period is not freely selectable (§ 18 para. 2a UStG).

The preliminary tax return must be submitted to the responsible tax office by the 10th day after the end of a preliminary tax return period.

Upon application, a permanent extension of the deadline can be granted, extending the deadline for submitting a preliminary VAT return by one month (§ 46 UStDV). No justification is required for the application for a permanent extension.

For monthly filing requirements and extended filing deadlines, a special advance payment of 1/11 of the total advance payments from the previous year is due annually. For newly established companies, the special advance payment is based on the anticipated sales in the founding year and, in the following year, on the total sales of the previous year projected to a calendar year (§ 47). The special advance payment is credited against the tax liability for the December filing period. No special advance payment is required for quarterly filing requirements.

Reporting characteristics and transmission format

The taxpayer must calculate the value-added tax (VAT) liability or refund themselves (self-assessment), declare it in a preliminary VAT return, submit it to the tax office, and pay any VAT liability on time. Because the tax is self-calculated, VAT is a self-assessment tax (§ 150 para. 1 sentence 3 AO). Thus, it is essentially a self-assessment tax. The submission of the preliminary VAT return is equivalent to a tax assessment subject to review (§ 168 sentence 1 AO). If the tax return results in a refund or a reduction of tax already due, it is only equivalent to a tax assessment once the competent tax authority approves it (§ 168 sentence 2 AO).

Until 2004, data was submitted using a paper form or, voluntarily, electronically. Since 2005, advance tax returns must be submitted online via the ELSTER system. This can be done either directly through the ELSTER portal or using third-party software. Electronic transmission was possible years before the introduction of the ELSTER procedure. This was based on the "Ordinance on the Submission of Tax Returns on Machine-Readable Data Carriers and on Remote Data Transmission" (Tax Return Data Transmission Ordinance – StADÜV of October 21, 1998).

Since January 1, 2013, electronic transmission must be authenticated.

If there is no possibility of submitting the tax return electronically, a preliminary VAT return can still be submitted in paper form under certain conditions (hardship case).

According to the DIHK (Association of German Chambers of Industry and Commerce), suppliers and installers of PV systems will in future have to differentiate between small systems for which the zero tax rate applies or not.

Due to the 30 kilowatt-peak presumption rule, suppliers and installers of PV systems generally do not to inquire about the building's intended use from the buyer. However, documentation is required confirming that the system in question is under 30 kilowatt-peak (kWp).

It is not yet clear whether a simple note on the invoice is sufficient to indicate that the purchase is for a system under 30 kWp.

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