Lower Saxony Fiscal Court, 21 December 2009, Ref.: 16 K 377/09
VAT is always due when goods or services are sold.
Accordingly, entrepreneurs are obliged to invoice their customers for VAT separately and to pay it to the tax office as part of the regular advance VAT return.
Of course, entrepreneurs themselves also pay VAT (input tax) on company-related purchases. This input tax can then later be offset against the VAT that the entrepreneur has to pay to the tax office.
Only entrepreneurs within the meaning of the German Value Added Tax Act are therefore entitled to deduct input tax. An entrepreneur within the meaning of Section 2 (1) UStG is anyone who carries out a commercial activity independently. Commercial is any sustainable activity for the purpose of generating income.
A private individual who operates a solar energy system on a private house and sells the electricity generated to the grid operator is therefore also an entrepreneur within the meaning of the VAT Act.
Nevertheless, in most cases operators of solar energy systems will not be obliged to submit VAT returns (or pay VAT), as they fall under the small business regulation of § 19 UStG.
Small businesses in this sense do not have to declare and pay VAT. However, even those entrepreneurs who actually fall under the small business regulation due to their turnover can choose the option vis-à-vis the tax office to list the VAT separately vis-à-vis the network operator and pay it to the tax office.
In return, they can claim back from the tax office the VAT they paid when purchasing the solar energy system (input tax).
In the above-mentioned decision, the Lower Saxony Fiscal Court now had to decide whether the extension of a solar system to a newly built carport also entitles the operator to deduct input tax for the input tax amounts paid for the construction of the carport.
FactsThe plaintiff was the owner of a farm building for vehicles, which he extended by adding a carport, which he in turn used to park a car not used for business purposes. Following the roof extension, the plaintiff installed a photovoltaic system on the roof area, with which he generated electricity and sold it to an energy supplier. Beyond the operation of the photovoltaic system, the plaintiff was not engaged in business activities.
In the advance VAT return for September 2008, the plaintiff claimed input tax amounts from the acquisition/production costs of the photovoltaic system and the roof extension.
As part of a special audit of the plaintiff, the defendant determined that input tax could not be deducted on the basis of the carport, as the building was not used for business purposes and was not in a uniform utilisation and functional context with the photovoltaic system, which was indisputably used for business purposes. The defendant therefore amended the assessment of the September 2008 advance VAT payment and no longer recognised the input VAT from the roof extension.
After unsuccessful appeal proceedings, the plaintiff brought an action before the Lower Saxony Tax Court.
Lower Saxony Fiscal CourtThe Lower Saxony tax court did not agree with the plaintiff's view. According to § 15 para. 1 sentence 1 no. 1 sentence 1 of the German Value Added Tax Act (UStG), the entrepreneur can deduct the legally owed tax for supplies and other services carried out by another entrepreneur for his company as input tax. However, this does not apply if less than 10 per cent of the goods supplied are used for his business (Section 15 (1) sentence 2 UStG).
It is true that the plaintiff is an entrepreneur within the meaning of Section 2 (1) UStG with regard to the operation of the photovoltaic system. However, the construction of the carport was not carried out for the plaintiff's business. The direct and immediate connection between the input service and the business required by case law (BFH ruling of 15 October 2009 XI R 82/07) was not given.
The photovoltaic system is not in a uniform utilisation and functional context with the building (carport). It represents an independent asset in itself, which can be operated independently of the roof surface for the purpose of generating electricity. The decisive factor here is that the roof surface only serves as a support for the photovoltaic system, which can be detached again and therefore the photovoltaic system is not an essential part of the building (carport), as it retains its physical and economic character.
Source: Lower Saxony Fiscal Court
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