Tax exemption for solar energy systems in Germany

Germany’s solar home systems have been given a major tax break package for the first time in the country’s history. Last week, the German parliament passed sweeping amendments to the tax rules for photovoltaic systems in the country, for a period of one year, subject to review, according to BV Magazine. The package includes exempting home solar energy systems of up to 30 kilowatts in size from value-added tax, according to the specialized energy platform.

The German Parliament (Bundestag) discusses the tax law at the end of each year, towards increasing, decreasing, stabilizing existing tax values, or imposing other types, according to developments in the economic and social conditions in the country. The tax amendment package aims to solve some of the main problems of solar energy systems for homes, and to eliminate some bureaucratic obstacles that small producers in Germany complain about. The package contains two important changes, the first aims to reduce the value-added tax to “0%” for home solar energy systems of up to 30 kilowatts, and the second measure allows tax exemptions for operators of small photovoltaic systems.


Solar panels exemption

The First Amendment exempts the purchase of solar panels for homes and related essential and supplementary systems from value-added tax, which is charged to the price when purchased from manufacturers or suppliers. The application of the exemption extends to storage systems in residential and public buildings used in public utility activities, but the exemption does not apply to sales of electricity from small solar energy projects. The income tax exemption will also be applied to the operating revenues of 30 kW solar power systems for single-family homes or other buildings. In the case of homes with more than one floor and more than one family living in them, the exemption limit will be set at 15 kilowatts per residential and commercial unit, according to what was monitored by the specialized energy platform.

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The union allows flexibility for countries

In December 2021, the European Union approved a new regulation to reduce value-added tax on solar energy systems in Europe, according to the circumstances of each country. The union’s regulation included solar panels used on rooftops in the list of commodities on which value-added tax can be imposed at a maximum rate of 5%. The regulation, issued by the European Solar Energy Council, stipulates the freedom of member states to determine the rates of reduction in value-added tax from 0 to 5% on 7 goods and services that include solar energy panels.

The aforementioned European exemptions include the supply and installation of solar panels on private residences and public buildings, as well as electric bicycles and waste recycling services. The exemptions for solar home systems are in line with the EU’s climate commitment plans to reach carbon neutrality by 2050. It is also believed that encouraging families to install solar panels near homes or on roofs contributes to protecting them from fluctuations in electricity prices in light of the highly turbulent global conditions due to the repercussions of the Russian-Ukrainian war. Research published by Solar Power Europe, Wallberga Hemisberger, indicated that households using solar panels in Poland, Spain, Germany and Belgium can save 60% of the cost of electricity per month.


Germany raises feed tariffs

Germany is the first country in the Union to apply a generous tax exemption on solar energy systems for homes since the issuance of this regulation, compared to other countries that applied tax cuts that did not reach the final exemption. Germany plans to increase electricity production from solar energy from the current 60 gigawatts to 215 gigawatts by 2030, by offering different packages of price incentives to small and large producers. In July 2022, the German Parliament approved amendments to the renewable energy law in Germany, with the aim of encouraging producers by increasing the feed tariff.

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The amendments to the law included the introduction of two separate tariffs for electrical feeding, allowing owners of solar energy systems for homes the freedom to choose between accepting a lower feeding tariff and using part of the electricity produced on their roofs for domestic consumption. It also allows them to get an additional reward in addition to the feed-in tariff, if they sell all 100% of the energy produced on their roofs, which contributes to supporting the country’s national electricity grid, according to the specialized energy platform. Accordingly, the purchase tariff for solar energy up to 10 kilowatts was raised from 0.0693 euros ($0.073) per kilowatt-hour to 0.0860 euros per kilowatt-hour. Those who decide not to use any of the electricity produced from their solar panels will also be given a full feed bonus of €0.048 per kilowatt-hour. It is expected that farmers will be the first to benefit from these incentives, as they can register a system with a capacity of 15 kilowatts for self-consumption, and a complete feeding system with a capacity of 70 kilowatts.

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