Tax Profressional usually responds in minutes

Our tax advisers are all verified

Unlimited follow-up questions

  • Sign in
  • Tag Archive: Germany

    1. New Zero Tax Rate on Photovoltaic Systems in Germany

      Leave a Comment

      New Zero Tax Rate on Photovoltaic Systems in Germany – Introduction

      The world of taxation and renewable energy has seen a significant shift in Germany with the introduction of the zero VAT rate on photovoltaic systems, as per Section 12 (3) of the German Value Added Tax Act (UstG), effective from January 1, 2023.

      This groundbreaking move, aimed at promoting green energy, initially stirred confusion and uncertainty among stakeholders.

      However, the German Federal Ministry of Finance (BMF) has released comprehensive clarifications, most recently in its letter dated 30 November 2023, building on earlier guidance from February 27, 2023.

      Here’s an in-depth look at what these changes entail.

      Key Developments in the BMF’s November 2023 Circular

      Withdrawal Option for System Operators

      One of the critical aspects addressed is the option for withdrawal.

      This is particularly relevant for operators who installed their systems before 31 December 2022, and had opted out of the small business regulation to benefit from the input tax deduction.

      The BMF allows a retroactive withdrawal to 1 January 2023, but only until 11 January 2024, as a protection of legitimate expectations.

      Unified Supply of Photovoltaic and Storage Systems

      The BMF clarifies that a combined purchase of a photovoltaic system and an electricity storage system under a single contract is considered a unified supply of goods.

      This means the zero tax rate applies to the entire system, streamlining the VAT process for such transactions.

      Expanding the Scope of Zero-Rated Items

      The BMF has expanded the scope of zero-rated items to include solar carports and solar patio roofs, along with their direct mounts.

      This extension, however, doesn’t cover the entire substructure to which the panels are attached.

      Simplification for Electricity Storage Systems

      For simplification, electricity storage systems are preferentially treated under the zero tax rate if they have a capacity of at least 5 kWh.

      Storage systems using hydrogen as a medium are also included, provided the hydrogen is exclusively used for converting energy back to electricity.

      Additional Clarity on Related Measures

      The BMF’s guidance extends the zero tax rate to necessary modifications like the extension or renewal of the meter box due to the installation of the photovoltaic system.

      However, it doesn’t cover other electricity-consuming systems powered by the photovoltaic system, such as heat pumps or charging infrastructure.

      Invoice Identification for Small Businesses

      Small businesses exclusively operating a photovoltaic system and engaging in tax-free letting and leasing can use their market master data register number in invoices instead of the VAT identification number, easing administrative burdens.

      Implications and Takeaways

      This comprehensive guidance from the BMF is a significant step in clarifying the implementation of the zero VAT rate for photovoltaic systems in Germany.

      The circular ensures:

      • Equality for Operators: Both operators of pre-2023 systems and newer installations are treated equally under the new regulations.

      • Simplified Tax Compliance: The clarification on unified supplies and the expansion of zero-rated items simplify VAT compliance for businesses.

      • Promotion of Green Energy: These measures are in line with Germany’s push towards sustainable energy, making photovoltaic systems more financially attractive.

      New Zero Tax Rate on Photovoltaic Systems in Germany – Conclusion

      The BMF letter serves as a crucial supplement to its February 2023 counterpart, providing clarity and legal certainty in the application of the zero VAT rate for photovoltaic systems in Germany.

      This move not only streamlines tax processes for businesses but also significantly contributes to the promotion of renewable energy sources in the country.

       

      Final thoughts

      If you have any queries about this article on New Zero Tax Rate on Photovoltaic Systems in Germany, or German tax matters in general, then please get in touch.

       

    2. Germany cryptocurrency tax: clarification issued

      Leave a Comment

      Germany cryptocurrency tax: Introduction

      In an eagerly anticipated announcement, the German Federal Ministry of Finance (BMF) has clarified its view on the taxation of cryptocurrencies.

      In addition to the position on the buying and selling of crypto, the guidance also sets out the position on activities such as mining, staking, lending, and other transactions.

      The nature of cryptocurrencies

      The German tax man has determined that units of cryptocurrencies are economic goods. These ‘goods’ are attributable to the owner as the holder of the private key.

      In cases where the wallet and private key is managed by a third party provider (such as Coinbase or Binance) then the asset is attributable to the beneficial owner of the cryptoassets.

      Key issue: Private activity v commercial activity

      Like many jurisdictions, the key issue for determining the tax position on any profits generated is whether the transactions take place through personal activity or in the conduct of a commercial activity.

      In this regard, the BMF has confirmed that investors who hold their cryptocurrency as personal assets can sell them free of tax as long as they hold the assets for at least one year.

      This is welcome as, in previous missives, the BMF had stated that the holding period was ten years for private investors.

      This one-year period does not apply if the cryptocurrency is held as business assets.

      Again, as per other jurisdctions, in many cases the distinction between commercial and private activity might be a blurred one and is an area ripe for dispute.

      It should be noted that if cryptocurrencies are held by a domestic corporation such as a GmbH then the income is always considered to be commercial.

      Mining and Forging activities

      The authorities have also set out the position for other blockchain activities including:

      • Mining in a proof of work consensus mechanism; and
      • Forging in a proof of stake consensus mechanism

      It seems to be the case that the German tax authorities will assume that such activity is commercial in nature.

      The block creation leads to an acquisition (not to a production!) of the asset, which has to be recognized at the market price at the time of acquisition (profit-increasing). Only at the time of the realization of the proceeds from a future sale are any acquisition costs to be deducted from the profit.

      Only the staking (without taking over the block creation), as well as, if applicable, the participation in mining and staking pools or a cloud mining service may again fall within the scope of private asset management. However, again, this depends on the individual case.

      Airdrops

      The authorities has also set out its view on the acquisition of cryptocurrencies received by private investors in the context of airdrops. Here, the receipt of the new tokens may be taxable where the recipient of the airdrop has dome something in return for the airdrop.

      Perhaps surprisingly, the authority considers it sufficient for this purpose that the recipient is required to provide contact details on an online form.

      Where nothing is done in return for the airdrop then there are no tax consequences (although German gift taxes might be in point on the receipt).

      ConclusionGermany Cryptocurrency tax

      Of course, this additional clarity is helpful. Of course, the fact that an private investor can dispose of assets free of tax after 12 months is very welcome for relevant investors.

      It remains to be seen whether there will be further missives from the German tax authorities that include their position regarding Non‑Fungible Tokens (NFTs) and other types of assets and activities.

      If you have any queries about this article, German cryptocurrency tax, or the matters discussed more generally, then please do not hesitate to get in touch.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article

      For further resource on crypto assets please see www.cryptotaxdegens.com.