Hobbyist option for photovoltaic systems

Operators of small photovoltaic systems and combined heat and power plants can now have the system declared a hobby and thus save themselves profit forecasts and declaration effort.

Anyone who generates electricity with a photovoltaic system or a combined heat and power unit and feeds it at least partially into the public grid is an entrepreneur within the meaning of the Value Added Tax Act and generates commercial income that is subject to income tax. Not only for the owners, but also for the tax office, this regularly means a lot of administrative work for comparatively low sales, because in addition to the annual assessment, the intention to make a profit with the plant must be proven and verified by the tax office.

In view of the long operating period of such a plant and the various influencing factors, it is not always easy to forecast whether the plant is designed to generate a profit. The Federal Ministry of Finance has therefore created a simplification rule for small photovoltaic systems and comparable combined heat and power plants. According to this regulation, the tax office assumes without further examination that a hobby business, which is not relevant for income tax purposes, exists if the operator declares that he would like to make use of the simplification regulation.

In this case, the otherwise required time-consuming forecast calculation is no longer necessary and you no longer have to prepare an annual profit determination and submit it to the tax office. Neither profits nor losses from the investment are taken into account for income tax purposes.

This applies both to the future and to the past, insofar as the notices can still be changed, e.g. because they were issued subject to review or provisionally, or because they were contested with an appeal. This may result in back payments for previous years if losses were previously taken into account from the investment. In this case, interest on arrears may also be incurred. In the case of previous years for which the tax assessment can no longer be changed, the previous tax treatment is retained.

Since the plant is operated with the simplification rule from the outset without the intention of making a profit, there is no business operation for income tax purposes. This means that the photovoltaic system or the combined heat and power plant does not constitute a business asset. Correspondingly, there will be no profit or loss from the discontinuation of the business at a later date. Likewise, there is no need to determine and establish any hidden reserves that may exist.

Photovoltaic systems with an output of up to 10 kW and combined heat and power plants with an electrical output of up to 2.5 kW are eligible for the simplification regulation. The total output of the plant is relevant, even if the plant is operated jointly by several persons or households. A further prerequisite is that the system was commissioned for the first time after 2003 and is installed on a single-family or two-family house property, including outdoor facilities, that is used for the owner's own residential purposes or is provided free of charge. You can also make use of the simplification rule if you use a home office in the property or if you occasionally rent out rooms and the rental income from this does not exceed 520 euros per year.

To exercise the option, it is sufficient to submit a written declaration to the tax office, which must include the performance of the installation, the date of initial commissioning and the place of installation. The declaration can also be sent to the tax office via the ELSTER website or by e-mail. If the requirements for the option cease to apply at a later date - for example, because the plant has been enlarged - you must inform the tax office of this in writing.

Under sales tax law, however, the only criterion for entrepreneurial status is whether the operation of the plant is intended to generate revenue. Whether the plant is operated at a profit or loss for tax purposes is irrelevant. Accordingly, the right to choose a hobby has no effect whatsoever on sales tax. However, there is a small business regulation in VAT law, which regularly also applies to the operators of a photovoltaic system or a combined heat and power plant.

With the small business regulation, no sales tax is levied on the revenues and you then usually do not have to submit any advance sales tax returns. However, in this case you cannot claim any input tax. In combination with the hobbyist option, however, the regulation has the advantage that there are then no ongoing tax obligations associated with the investment.

Those who instead wish to claim input tax from the purchase of the system must waive the small business regulation. This option then binds the operator for at least five calendar years. After that, a return to the small business regulation is possible.