Contracting Structures to Reduce Energy Taxes Under Criticism

By outsourcing their energy supply to contractors, many German companies benefit from tax breaks with respect to energy taxes like the electricity tax (Stromsteuer) and the mineral oil tax (Mineralölsteuer). The underlying contracting structures are increasingly criticised.

The Federal Audit Authority (Bundesrechnungshof), estimated that Germany loses tax revenue of EUR 500 million every year. Contracting schemes have become a mass phenomenon. Tax advisers, engineers and consultants offer to provide the energy supply for instance for a department store or a hotel. In practice only the heating system or the air condition is transferred to a Limited Liability Company under German law (GmbH). The GmbH is considered to be part of the manufacturing industry (produzierendes Gewerbe), and therefore receives material tax breaks the hotel or department store would not have been able to claim. With respect to electricity tax pursuant to the Electricity Tax Act (Stromsteuergesetz – StomStG), tax breaks can be as high as 97%. Reductions of the mineral oil tax pursuant to the Energy Tax Act (Energiesteuergesetz – EnergieStG) can be as high as 66%. Contractor and customer agree on a  split of the tax benefits.

The Federal Audit Authority fears that in the long run most big and middle-sized companies will use this tax saving scheme, so that only small companies and private households will pay the energy taxes in full.

According to a spokesperson of the Federal Ministry of Finance, the ministry will present a draft to the Federal Cabinet this spring that addresses the issue. It remains to be seen how the ministry will try to redraw the line to establish which contracting schemes will be acceptable, and which not.

Source: Financial Times Deutschland