Trade tax incentives in tenant electricity

According to several concurring reports, the German coalition parties CDU/CSU and SPD have agreed to overcome the existing trade tax hurdle for tenant electricity projects (Immobilien Zeitung, haufe).

The background is that although a major contribution is required from landlords in the context of the energy turnaround – for example, by operating photovoltaic systems or providing charging stations for electric cars – the income generated from these projects is to be assessed as commercial under the Trade Tax Act and they do not qualify for exemption under the “extended trade tax reduction” (Section 9 no. 1 sentence 2 Trade Tax Act). This affects not only the income from these “harmful” ancillary activities, but the entire rental income and makes the implementation of tenant electricity projects very unattractive for landlords.

According to a letter from the CDU/CSU Parliamentary Group dated 26 March 2021 and applauded by the housing industry, the governing coalition would like to remove this long-known obstacle in the implementation of the Tenant Electricity Act from July 2017, at least for residential properties.

The aim is to allow income from landlords derived from the supply of electricity from renewable energies to their tenants up to a level of ten per cent of the income from housing management, without the entire rental income being subject to trade tax.

The next step is to refer the proposals to the Federal Cabinet. It has not yet been decided whether the amendments will subsequently be adopted into law in the form of a supplementary act to the Renewable Energy Sources Act or to the law on ancillary costs, or whether they will be implemented as part of an ordinance of the Federal Ministry of the Interior or the Federal Ministry of Justice.