Taxation rules prevent German fund managers from roof-mounted solar power investments – association

Raising private capital to fund the fast expansion of Germany’s solar power capacity could face difficulties due to regulatory challenges in taxation law, fund manager association BVI said in an article by business daily Handelsblatt. The government’s so-called “Growth Opportunities Act”, which aims to encourage private investments in energy transition efforts, would, in its current form, undermine the construction of new solar power capacity, particularly on the roofs of commercial buildings, BVI taxation expert Bastian Hammer said. This is despite many investors being eager to put their money into solar power, Hammer added. “The fact that so far there are very few solar arrays on commercial buildings is caused by the German tax law,” he argued. Investment funds are currently not allowed to make a profit from producing electricity if the proceeds exceed ten percent of their income from rent. Companies exceeding this share currently also lose their status as a special investment fund, causing them further regulatory obligations. The Growth Opportunities Act aims to double this threshold to 20 percent, which is still not enough to trigger widespread change, the BVI expert argued. The government “should get its act together and remove the limit for solar power.” Solar power production, particularly from large commercial building roofs, could mean that income quickly exceeds the 20-percent cap or more if power prices are high. Moreover, if commercial space in a building is vacated and rental income drops, the threshold would be breached even faster, Hammer said. Markus Herbrand, finance expert of the government party Free Democrats (FDP), said he supports the fund managers’ demand for eased taxation rules “to launch a booster and put solar PV installations on every adequate commercial building.” However, Green Party finance politician Stefan Schmidt said that while a further lifting of the threshold is conceivable, “we are skeptical about a much higher cap or completely doing away with it.”

Solar power systems cover about 10 percent of Germany’s electricity demand, with plans to increase the share to around 30 percent by 2030. Analysis from earlier this year found that Germany overtook Spain to become the leading PV market in Europe. The Growth Opportunities Act, introduced in response to the German economy’s contraction in the wake of the energy crisis, includes several billions of euros in tax credits, as well as new direct financial support for climate and energy efficiency investments through a so-called “investment premium”.