Solar: Photovoltaics cheaper in 2023 – No more tax on the purchase and operation of smaller solar systems

The 2022 Annual Tax Act provides for significant tax relief for smaller photovoltaic systems. This will affect both income tax and value-added tax.

On September 14, 2022, the German Federal Government agreed to reduce tax and bureaucratic hurdles for photovoltaic systems as of January 1, 2023.

“The 2022 Annual Tax Act sets the course for a transparent and fair tax system. The focus is on tax relief and adjustments that will further advance the digitalization of tax administration.”

The Annual Tax Act 2022 (JStG 2022) aims to address this technically necessary legislative need. This includes the introduction of an income tax exemption for certain photovoltaic systems and the expansion of the advisory authority of wage tax assistance associations in connection with tax-exempt photovoltaic systems.

Introduction of an income tax exemption

An exemption from income tax is introduced for income from the operation of photovoltaic systems up to a gross rated output (according to the market master data register) of 30 kW on single-family homes and commercial properties, or 15 kW per residential and commercial unit for other buildings predominantly used for residential purposes (e.g., multi-family homes, mixed-use properties).

Expansion of the advisory authority of wage tax assistance associations

Wage tax assistance associations should in future also be allowed to advise their members on income tax if they operate photovoltaic systems with an installed capacity of up to 30 kW (peak) which are subject to the aforementioned income tax exemption.

Value Added Tax: Zero tax rate

A zero VAT rate will apply in the future to the supply, intra-Community acquisition, import, and installation of photovoltaic systems and electricity storage systems, provided that the service is provided to the operator of the photovoltaic system and the system is installed on or near private residences, apartments, and public or other buildings used for public benefit activities. Since photovoltaic system operators will no longer be charged VAT on the purchase of the system, they will no longer need to forgo the small business exemption to claim input tax credits. This will reduce their administrative burden.

It was already possible to have the VAT on solar panels refunded by the tax office. This is now simpler and eliminates bureaucratic hurdles.

Previously, owners of solar power systems generating up to 10 kWp could have their systems exempted from taxation upon application. Private photovoltaic systems that fed electricity into the public grid for profit were also generally classified as hobbies by the tax office, thus exempting their owners from taxation. However, this required a profitability forecast.

In the other case, the small business regulation could be applied up to a turnover of €22,000, meaning that one is not subject to VAT. This applies to the majority of all private PV system operators, as long as they do not have any other income from self-employment.

“The planned legal changes can certainly be described as sensational, as they will bring about genuine tax simplification and a welcome reduction in bureaucratic obligations.”

In addition:

• Tax relief for smaller photovoltaic systems from 2023

Changes in EU law now make it possible to supply and install photovoltaic (PV) systems without VAT. This allows private operators, in particular, to purchase their new systems more cheaply, namely at the net price. See also Zero VAT rate for solar systems, installations, and electricity storage.

Regarding income tax, the federal government is heeding the appeal from the states to make the operation of small photovoltaic systems legally tax-exempt. This will benefit systems on single-family homes up to 30 kilowatts peak. For multi-family homes and mixed-use buildings, the limit is 15 kilowatts peak per residential or commercial unit. Currently, a simplified tax rule only applies to systems up to ten kilowatts peak.

Here are the current opinions on this:

Baden-Württemberg's Finance Minister Dr. Danyal Bayaz said: "We need more solar power for the energy transition. Reducing tax obstacles and bureaucratic burdens will help with this."

Hesse's Finance Minister Michael Boddenberg: "Private photovoltaic systems can make an important contribution to the energy transition, because every step counts. We want to save on bureaucratic effort. No one should have to go to a tax advisor just because of their photovoltaic system."

Bavaria's Finance Minister Albert Füracker: "Less bureaucracy and at the same time more legal certainty – an important step to make operating photovoltaic systems significantly easier and more attractive for citizens. Tax law also makes a crucial contribution to the success of the energy transition. It's good that the federal government has finally taken up this demand from Bavaria and the other states."

North Rhine-Westphalia's Finance Minister Dr. Marcus Optendrenk: "Photovoltaic systems make a practical contribution to a reliable, independent and sustainable energy supply. Doing more, less bureaucracy – that's what it's all about now."

Schleswig-Holstein's Finance Minister Monika Heinold: "For the energy transition to succeed, we need everyone. In the states, we see what works on the ground and where there are still obstacles. We want to remove these obstacles and simplify the use of private photovoltaic systems. It's good that the federal and state governments are working together on this."

The planned zero VAT rate is something completely new in German VAT law. This means that deliveries and installations of these systems will be taxed at a rate of 0% starting next year. In other words, there will be no VAT, or rather, the VAT rate will be 0%. We are familiar with a similar (but entirely different) reduced VAT rate of 7% for food, books, and newspapers.

Background information:

The standard VAT rate is 19 percent. Certain services are taxed at a reduced rate of 7 percent according to Section 12 Paragraph 2 of the German VAT Act (UStG) or are exempt from VAT according to Section 4 of the UStG. The standard rate of 19 percent has been in effect since January 1, 2007, and the reduced rate of 7 percent since July 1, 1983. In addition, Section 24 of the UStG provides for average rates for agricultural and forestry businesses, which can be 5.5 percent or 10.7 percent. Furthermore, Section 23 of the UStG provides for average rates derived from these two rates for agricultural and forestry businesses, as well as certain companies and corporations.

The zero tax rate will now apply from 2023 onwards to installations and deliveries of solar modules, including electricity storage systems, to operators if the PV system is installed on or near private residences as well as public and other buildings.

In the future, it will be the responsibility of the solar installer or seller to determine whether the 0% or 19% VAT regulation applies. This can be done either through written prior confirmation from the customer that they will not be operating a system larger than 30 kWp and/or by providing proof via the market master register

• More about the Market Master Data Register (MaStR)
• Registration in the market master data register

A solar power system, energy storage unit, or completed installation that has already been purchased cannot be retroactively invoiced using the zero VAT rate. Logically, with the zero VAT rate, there is also no longer any possibility or need to claim a VAT refund.

If the purchase and commissioning via a specialist company for the year 2022 has not yet been completed and advance payments have already been made, the commissioned company can still correct the 19% VAT calculated for 2022 accordingly in the final invoice for 2023.

We're local! We provide consultation, planning, and installation services. We have attractive solar solutions for you, from your roof and patio to your parking space

Get in touch with us 👈🏻

Everything from a single source, specifically designed for solar solutions for large parking areas. Refinance or offset your future costs with your own electricity generation.

Find advice and solutions here 👈🏻

Consultation and planning including a non-binding cost estimate. We connect you with strong partners in photovoltaics.

Find advice and solutions here 👈🏻

Over a thousand expert articles can be found here on our website. Numerous figures, data, and facts are available for download in many PDFs

If you're looking for a competent and reliable partner for the planning, installation, and maintenance of your solar system, then you've come to the right place. On our website, you'll find over a thousand expert articles on photovoltaics, solar systems, and solar roofs. In addition, we've compiled numerous facts and figures to give you a comprehensive overview of the possibilities and options available.

We are a leading provider of solar solutions in Germany, offering solar consulting, planning, and installation of photovoltaic systems. Our extensive experience covers the conception, planning, and implementation of various solar power systems of all sizes. We will find the optimal solution for your individual needs – whether for single-family homes, apartment buildings, industrial or commercial properties, agricultural operations, or municipal facilities.

In addition to our professional consultation, you will find comprehensive information about solar power and photovoltaics on our website. Through our diverse offerings, we aim to provide you with an overview of the possibilities of using renewable energies. You can also see for yourself what is possible with state-of-the-art technology – simply browse our sample installations!

Solar power systems are an environmentally friendly alternative energy source. If you are interested in installing a solar power system, contact us for a free, no-obligation consultation. Together we will find the best solution for your needs.

Photovoltaic Library (PDF) – Image: Xpert.Digital / Benvenuto Cellini|Shutterstock.com