Germany approves tax benefits for small solar installations

The German Parliament has approved a number of tax benefits for small photovoltaic (PV) systems in a move expected to spur the deployment of solar energy on the roofs of residential and commercial buildings across Germany.

The changes are part of the Annual Tax Act 2022 that the Bundestag passed on Friday.

Under the new tax rules, the operators of small solar power plants will not pay income and trade tax on the income from the feed-in of solar power. This tax relief applies with retroactive effect as of January 1, 2022 to photovoltaic (PV) systems on single-family houses and commercial properties of up to 30 kWp. For multi-family and mixed-use buildings, the exemption will apply to solar plants of up to 15 kWp per residential or commercial unit, but only up to 100 kW per taxpayer.

In addition, the 19% VAT on the purchase and installation of photovoltaic systems including battery storage will be removed on January 1, 2023. The VAT exemption applies also to systems that were ordered in 2022 but will go into operation next year. The tax benefit is estimated to save a four-digit amount on the purchase of a new solar system.

Commenting on the issue, the chairman of the renewable energy association in North Rhine-Westphalia LEE NRW, Reiner Priggen, said that the tax exemption for private photovoltaic systems gives many homeowners a long overdue incentive to invest in solar energy.

In his words, the enormous bureaucratic effort associated with the tax returns for the income from solar power generation has deterred many homeowners from installing their own solar systems.

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