BFH: No Partial Tax Reduction for Private Costs of Building with Rooftop PV Power Plant

In October 2013 the Federal Fiscal Court (BFH) ruled that costs related to a private building not used to generate income were not tax deductible when a solar power plant was operated on the roof, the court informed in a press release dated 19 March 2013.

Plaintiff had installed solar power plants on the roofs of two halls and fed the electricity into the public grid. He declared the feed-in tariffs as business income (gewerbliche Einkünfte). He had rented the two halls for a very low rent to his wife, who used them to operate a boarding home for horses.

The revenue office denied the intention to generate profits by renting the two halls. Therefore it did neither deduct the costs of the two halls in its tax assessment as promotion and advertising costs (Werbungskosten) when establishing the revenue obtained from letting or leasing real estate nor as partial operating expenses when establishing the business income obtained from the solar power plant.

In line with the previous instances BFH upheld the assessment. The court argued that the solar power plants and the halls were individual assets that did not (not even partially) belong to the business asset “electricity generation”.  The fact that the two halls were “the foundation” for the solar power plants did not mean that part of the costs could offset when establishing the business income, since the expenses could not be split into a private use of the halls and a professional use of the roofs of the halls in a verifiable way.

The press release consoles readers by saying only at first glance was the judgement negative for tax payers, who operated solar power plants on their private homes. While expenses for the house were not tax deductible, the house did not (partly) become a business asset, which meant that in case of a sale of the building within the ten-year speculation period (between acquisition and sale of the property) no income tax was payable.

Source: BFH, ref. no. III R 27/12

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