Photovoltaics · 4 min read

PV direct investment: current developments in direct investment

This guide refers to German law and the German tax system. It is a translation of our German original and does not replace individual tax or legal advice.

The growth of sustainable investments in renewable energy is not slowing down this summer either. As a result, both existing investors and newcomers are flocking to environmentally friendly, high-yield solar direct investments. On this occasion, we explain what you need to consider with your photovoltaic direct investment and how the direct investment develops for private investors. Together with a look at the result after tax, you can evaluate a solar direct investment as a potential investment for yourself in the best possible way.

As an independent financial adviser, Neo Capital supports its clients in positioning themselves optimally in financial terms. We rely on data-driven decisions and take into account the tax characteristics of every investment. This approach enables us to convert high taxable one-off payments to wealthy private individuals into tax-free private wealth over the long term. We will be happy to advise you individually and discreetly on your investment strategy so that you are financially well protected.

Sustainable solar direct investments for private individuals

Solar direct investments are investments made in subsidy-eligible solar installations that receive a state feed-in tariff. Germany's Renewable Energy Sources Act (EEG, Erneuerbare-Energien-Gesetz) also allows investors to use a PV system as an instrument for an individual tax advantage. This is particularly relevant for well-paid employees facing a large tax burden from a high severance payment or company pension. We have explained how the photovoltaic direct investment behaves as an IAB-eligible investment in this article. Thanks to subsidies and rising energy demand, the solar investment currently stands out as the most attractive investment for reducing your individual tax burden. As demand for PV direct investments is not levelling off in 2023 either, it is worth looking at how they have developed so far. In recent years, classic solar installations have achieved an average yield of 6.50% p.a. This figure refers to conventional rooftop PV systems, while solar installations with more than 1,000 square metres can achieve yields of up to 10.00% p.a. The reason for this is the lower purchase cost of the PV system per kWp, which is particularly noticeable on large areas. Despite lower prices for electricity buyers due to the electricity price brake (Strompreisbremse), continued high demand and the energy transition ensure consistently high returns. An initial comparison shows that photovoltaic direct investments remain a sought-after form of secure investment in the second half of the year as well.

Income from solar installations: how much investors keep after tax

As with any investment, the question of tax treatment arises at the start of a solar direct investment. For many investors, this is where the advantage over conventional asset classes lies, as photovoltaic systems qualify for the investment deduction (Investitionsabzugsbetrag, IAB). The photovoltaic direct investment is offset in the year of purchase against any severance payments or other high income, which drastically reduces your personal tax burden. Ongoing income from solar direct investments is likewise set against tax-optimised depreciation, which lowers the tax burden sustainably. Ongoing profits from feeding your electricity into the grid are covered for 20 years by the feed-in tariff under the Renewable Energy Sources Act. This means you can calculate in advance the minimum income your photovoltaic direct investment will generate. This income from a trade or business (Einkünfte aus Gewerbebetrieb) is subject to your income tax and can be ideally optimised through tax structuring. It is the exceptional depreciation of the IAB-eligible solar direct investment and the long-term "solar pension" that make a PV system attractive for optimising your income tax. Reason enough to consider the opportunity for a sustainable investment with tax advantages.

Neo Capital: professional advice for your photovoltaic direct investment

As you can see, the solar direct investment comes first for investors due to numerous factors. The special position of the PV system in the energy transition and an incomparable tax advantage show why rooftop PV systems and solar parks are experiencing high demand in 2023 as well. We support our clients in entering PV direct investments in a tax-optimised and sustainable way. As independent financial investment advisers, we work together with your tax adviser to reflect your investment ideally. In addition to advice on a solar direct investment, we accompany you throughout the entire process and provide a transparent overview of your investment strategy. This way, your solar installation gives you maximum tax advantages in the year of purchase and you benefit from a state-secured return over the next 20 years. Would you like to lower your income tax with photovoltaic investments? Then contact us without obligation. Our experts will advise you comprehensively on your financial provision and tax structuring through PV systems. We also look at ways of reducing your tax retroactively through IAB-eligible photovoltaic systems. Feel free to ask us about our options for structuring financial investments; we work on a long-term, results-oriented basis on positioning our clients from all over Germany.