Photovoltaic systems

On December 2nd 2022, the German parliament passed the Annual Tax Act 2022 (the "JStG"), setting an important signal for renewable energy generation in the real estate sector and at the same time creating an important step towards climate neutrality.

Previous legal situation

Under the previous legal situation, the operation of photovoltaic systems for special investment funds in buildings was associated with considerable tax risks. As a result, special investment funds were able to generate 5% of their income from revenue from photovoltaic systems and charging stations. Against this background, this has not been very attractive for special investment funds in practice and has always been fraught with supervisory and tax risks.

Legal situation after approval by the German Federal Council

The JStG contains for the first time a comprehensive change in the tax treatment of photovoltaic systems. In future, the “de minimis” thresholds for special investment funds, e.g. for the operation of solar installations on buildings and charging stations for electric vehicles, will be raised from 5 to 10 %. Accordingly, special investment funds may generate less than 10 % of their income from photovoltaic systems and charging stations.
The change in the German Investment Tax Act (the "InvStG") is an important and helpful step and creates some relief.
However, for a noticeable jolt to go through the entire investment industry, more certainty, especially in supervisory law, must be created. In this respect, the new “de minimis limits” will otherwise probably not be fully utilised.
A corresponding regulation by the legislator for real estate funds in supervisory law within the framework of the German Capital Investment Code (the "KAGB") would be appreciated. Alternatively, the Federal Financial Supervisory Authority (the "BaFin") could clarify a corresponding investment law regulation in a timely manner.
In order to maintain the fund qualification and avoid operational activity, a so-called "dirt quota" would be appropriate, for example, according to which investment funds may also generate less than 10% of their income from photovoltaic systems and charging stations under supervisory law. In this respect, Section 26 of the InvStG in particular shows that such "dirt quota regulations" are already recognised and lived in practice.
The goal must be that investment tax law and investment supervision law must interlock in order to avoid divergent solutions.

Outlook

After approval by the Federal Council, the JstG will be passed.