Solar direct investments are becoming increasingly popular in light of the current low-interest phase. In our Blog from 27.04.2016 we have already referred to this development and outlined the tax deferral benefits associated with such an investment. Accordingly, in addition to their economic and environmental benefits, such investments can also be interesting from a tax perspective.
In practice, however, it is becoming increasingly apparent that there is a lack of suitable roof surfaces with favourable sunshine conditions. It therefore makes sense to look to your own roof. This can be interesting for the investor and homeowner in two ways: they can continue to feed the electricity generated from their own roof into the grid and receive the legally guaranteed remuneration for this. In addition, however, they also have the option of consuming the electricity generated for their own household. The energy independence from external service providers is a nice side effect.
But what are the tax implications? The sun shines for free, so does nothing happen when you consume the electricity you generate yourself?
The fact that the electricity is generated on the investor's own roof does not change the fact that the investor is Commercial and sales taxable entrepreneur is fed into the grid. If the electricity continues to be fed into the grid for a fee, this does not change the our explanations nothing. The situation is different, however, if the electricity is also used for non-business purposes, i.e. for private consumption of the electricity or for supplying it to third parties free of charge, for example. In such cases, this would constitute so-called partially remunerated use.
The investor therefore has the choice of whether to allocate the system to the company "photovoltaics" or private assets. They should generally allocate it to the company, as this allows the VAT charged on the purchase to be reimbursed. However, the investor must then pay tax on the electricity consumed by himself as a gratuitous transfer of value. The basis of assessment for this is the (notional) purchase price at the time of turnover (see OFD Karlsruhe dated 15 February 2015).
But beware: the photovoltaic system can only be categorised as a business asset if it is used for business purposes for at least 10%. Classification as business assets is therefore decisive for input tax deduction, which means that input tax can also be claimed from renovation measures that were necessary for the installation of the photovoltaic system, for example. However, the classification decision must be made promptly, i.e. by 31 May of the following year at the latest, in order to ensure an input tax deduction from the purchase of the system.
However, it should also be noted in this context that input tax deduction is also excluded if the electricity is used directly for tax-free transactions (e.g. the electricity is used on rented residential property for the rented flats or the electricity is used in one's own medical practice).
If the use of the photovoltaic system changes over the years, the investor may be obliged to adjust the input tax. The adjustment period is generally 5 years for systems installed on the roof and 10 years for systems integrated into the roof.
Tobias Stiegler is a tax consultant at TAXGATE, a tax law firm specialising in transactions, investments and tax compliance.
