Kassel. Fuel cells are reliable and have an impressively high energy yield, thus lowering consumption costs and CO2 emissions. Kathrin Neumeyer, tax consultant and partner at consulting firm MPW Legal & Tax, explains what customers need to keep in mind when operating fuel cells, how municipal utilities can support their customers and what the benefits are.
Ms. Neumeyer, customers who wish to operate their own fuel cell units have to overcome a few bureaucratic hurdles. What do they need to consider?
Before a fuel cell may be operated, customers need to apply for several permits and take care of some official formalities. Of course there is some bureaucratic effort associated with this. The background being that a fuel cell does generate electricity which the customer can either use himself or feed into the power grid. In exchange, he is compensated by the grid operator. Because operators are required to purchase the power, they must be regularly informed about the quantity of electricity produced. Consumers can meet this requirement by using a digital meter showing how much electricity was fed into the grid and how much was consumed privately.
Are there any other reporting and information requirements for customers?
Customers intending to apply for funding for the fuel cell unit need to complete a one-time registration for the device at the Federal Office of Economics and Export Control (BAFA). The current fund amount is determined by the Combined Heat and Power Act (KWKG). Quantity reports to the BAFA must be made annually in order for funding for the combined heat and power unit to be granted. The Renewable Energy Act (EEG) also plays a role here. With the EEG 2014, privileges for independent power generation were significantly reduced and the EEG levy burden staggered. However, private users are not usually affected. This is because the EEG levy does not apply to small units with an electrical rating up to 10 kilowatts as long as generation and own use does not exceed 10 MWh per year.
What do customers need to keep in mind with regard to the tax situation?
It is much more complicated when it comes to taxation issues. When operating a fuel cell, the customer has to keep track of four different taxes at the same time: energy tax, electricity tax, VAT tax and income tax. For operation of a fuel cell, electricity tax is not relevant since the electricity fed in and used privately is tax-free. Only the withdrawal from the power grid is subject to tax. The energy tax is part of the natural gas invoice. The charge is €5.50 per MWh. But since natural gas is neither burned nor used for a motorized drive, this amount can be reimbursed. For this, the customer has to apply for a reimbursement at the main customs office and submit the tax bill.
What about VAT tax?
Anyone who regularly feeds electricity into the power grid (whereby a one-time input is sufficient as well) is considered an enterprise required to pay VAT tax. This means that all income is subject to a 19% VAT payable to the tax office. At the same time, input tax from the acquisition of the unit and current expenses of the system are deductible. This includes the fuel, for instance. This version is more complex because, in the first two years, the tax office requires monthly, preliminary VAT reports on the revenue and the input tax amounts from current costs. While this is somewhat complex in the beginning, it will become routine over time. It is made considerably easier if fuel cell operation generates less than €17,500 and thereby falls under the small business regulation. In this case, no VAT must be disclosed or paid on the revenue. This eliminates preliminary VAT reports and deduction of the input tax amounts. Administrative costs can thereby be significantly reduced.
What role does fuel cell operation play in income tax?
Fuel cell operation also needs to be considered when calculating income tax. This is where all costs and revenues are reported in the income tax return through a so-called revenue surplus statement, which almost everyone has to file with the tax office once per year anyway. Profits from a CHP system are considered commercial revenue, but no additional business tax is due for amounts up to €24,500.
What services can municipal utilities offer to support their customers with applications or in case of tax matters?
Information is definitely at the top of the list. One example would be a customer guideline offering advice on such questions as "How do I report a fuel cell?" or "When do I have to report what to whom?" and help with filling out forms. In addition, municipal utilities can offer their customers to help them with applications and reporting their measured quantities. I see a great deal of potential here, since municipal utilities in particular have the know-how to read the meters quickly and easily. Expense and effort for the municipal utilities is low but benefits to the customer are great. Municipal utilities could offer this service in combination with other services such as delivery of natural gas. However, the scope of assistance with tax and legal matters is limited. Direct representation of the customer at offices and authorities is strictly excluded. Assistance provided by the municipal utilities should therefore always be in conjunction with the provision of other services.
Could it be advantageous for municipal utilities to offer the customer a fuel cell contracting model?
Absolutely, this would give utilities a means of offering their customers an "all-round carefree package". In doing so, utilities could provide the investment, all maintenance work and, above all, handling of all tax and bureaucratic matters, depending on the contract model. As a rule, the utilities already have this know-how covered, since fuel cell contracting is not different than contracting with other CHP systems. For customers, who only benefit from its use, this is quite a convenient solution. The result would also be new business models for municipal utilities. It is important that municipal utilities themselves become active and promote enthusiasm among customers for this increasingly innovative and economically attractive technology, with which they can also make a considerable contribution to climate protection. The service mindset is what counts here. Cost structures for the contracting should therefore also be transparent and attractive. Offering good service and fair prices lets providers win over and retain their customers long-term.