Under this year’s Annual Tax Act, what changes will affect photovoltaic system operators and how will these changes impact PV installation companies? In a recent webinar (in German), the German Solar Association BSW-Solar and Intersolar Europe summed up the changes.
Income tax assistance associations are permitted to prepare income tax declarations
There is an important change concerning the preparation of tax returns: From 2023, income tax assistance associations will be permitted to help the operators of photovoltaic installations to prepare their income tax declaration. This changes the previous rule, whereby operators of solar systems who had not prepared their own tax return were obliged to consult a tax advisor.
Income tax exemption for PV
2023 will also see the introduction of a far-reaching tax exemption for PV: Photovoltaic systems with an output of up to 30 kWp on single-family homes and other buildings, as well as systems on multi-family homes up to a capacity of 15 kWp per residential or commercial unit, will be exempt from income tax. A cap of 100 kWp per taxpayer applies.
Zero sales tax rate
In addition to the income tax exemption, which applies to new and existing systems alike, sales tax on new purchases of PV systems up to 30 kWp and of storage systems will be scrapped. Systems above the 30 kWp level will also be exempt from sales tax provided the building in question is residential, public, or used for non-profit purposes. To receive the refund for any sales tax paid, buyers no longer need to be subject to sales tax rules themselves (Editor´s Note: In Germany, sales tax is added to the price of a product or service and paid to the tax office. In return, companies receive a refund from the tax office for the sales tax they are charged). The new regulation also does away with sales tax on private self-consumption. This applies to all PV systems.
Difference between existing and new installations
A distinction must be made between income tax and sales tax exemptions and the way they apply to existing or new installations: The income tax exemption is a blanket exemption that applies to all installations – both existing and new – up to the threshold mentioned above. Existing installations are not affected by the change in sales tax rules. Operators who are themselves subject to sales tax still have to pay sales tax on income and earnings withdrawn.
What do the new rules mean for solar specialists?
To avoid problems and help customers make full use of the tax advantages, specialist companies have to make some changes in the way they manage and invoice orders. The zero tax rate bears risks for solar specialists; particularly during the transitional period they have to be careful to invoice PV-related products and services correctly.
Handover and invoicing
Solar specialists are expected to push handovers into 2023 where possible so as to allow their customers to benefit from the zero tax rate. Such shifts may create a lower equity ratio for 2022, which will effect the 2023 tax bracket. Webinar host Stefan Mücke, a tax advisor specializing in photovoltaics, advises against pushing invoices for 2022 handovers into the new year.
The zero tax rate applies from the delivery date or the completion, commissioning and acceptance date. While advance payments are permissible, partial services from 2022 are subject to a 19 percent sales tax.
Distinction between complete system and components
The fact that the zero tax rate applies to complete plants, but not to individual products and components, may create additional pitfalls. The responsibility for establishing whether or not the zero tax rate applies lies with the solar specialist.
In 2023, the tax authorities will provide more detailed instructions to clarify a variety of practical applications.
Logged in users can find the webinar recording here.