The supply of tenants with electricity that is generated in close physical proximity to the consumer and not routed through the public grid, known as tenant electricity (Mieterstrom), is becoming increasingly important due to its economic attractiveness. The key drivers of this development are recent legislative changes. From a tax perspective, the Growth Opportunities Act (Wachstumschancengesetz) of 27 March 2024 (BGBl. I 2024 No. 108), the Third Act Amending the Energy Tax Act and the Electricity Tax Act (Drittes Gesetz zur Änderung des Energiesteuer- und des Stromsteuergesetzes) of 22 December 2025 (BGBl. I 2025 No. 340), and the Location Promotion Act (Standortfördergesetz) of 9 February 2026 (BGBl. I 2026 No. 33) have reorganised the framework for tenant electricity concepts. Real estate funds including open-ended real estate special funds and housing companies, as well as commercial tenant electricity providers, now face new opportunities.
1. Income Tax in Tenant Electricity Models
Companies that exclusively manage and use their own real property are, thanks to the extended property deduction under sec. 9 no. 1 sent. 2 et seq. of the German Trade Tax Act (Gewerbesteuergesetz, “GewStG”), effectively exempt from German trade tax (Gewerbesteuer). Running a renewable energy installation (EE-Anlage) within the meaning of sec. 3 no. 21 EEG at the same time was harmful for a long time in this context. Since 2021, however, sec. 9 no. 1 sent. 3 lit. b GewStG has introduced a harmlessness threshold that allows the simultaneous operation of renewable energy installations up to a certain share of revenues, so that only those revenues are subject to trade tax. The Growth Opportunities Act raised this threshold retroactively from the 2023 assessment period from 10% to 20% of rental income. The condition is that the electricity is supplied only to the operator’s own tenants or fed into the grid. Electricity from combined heat and power units is not covered by the relief, even though these are quite common in practice. Anyone who operates or has a BHKW operated must therefore continue to pay careful attention to how contracts are structured so as not to jeopardise the extended deduction.
The supply of electricity via charging stations for electric vehicles or electric bicycles is also harmless. Unlike electricity from renewable energy installations, electricity from charging stations does not have to be supplied exclusively to the operator’s own tenants. Situations in which a charging station is fed with electricity from the operator’s own renewable energy installation have not yet been conclusively resolved in law. Careful structuring to protect the extended trade tax deduction should be ensured in such cases.
Anyone who supplies both electricity from renewable energy installations and via charging stations should note that both revenue types count together towards the 20% threshold.
Example: A lettings company generates rental income of EUR 150,000 from letting a residential apartment block, income of EUR 20,000 (= 13.3% of rental income) from a rooftop PV installation, and income of EUR 12,000 (= 8% of rental income) from charging stations. In this case, the combined share of both revenue types at 21.3% exceeds the 20% threshold. The extended deduction would be denied. If the charging station income were only EUR 9,000, bringing the combined share down to 19.3%, the deduction would be granted. In effect, only the profit from the PV installation and the charging stations would then be subject to trade tax. To the extent that it relates to the operation of the renewable energy installation, a tax exemption under sec. 3 no. 32 GewStG may additionally apply.
For housing cooperatives and associations that are exempt from corporate tax (Körperschaftsteuer) under sec. 5 para. 1 no. 10 sent. 1 of the German Corporate Income Tax Act (Körperschaftsteuergesetz, “KStG”), the applicable harmlessness threshold has been raised from 20% to 30% of total income. The scope of application now expressly extends to income from communal building supply within the meaning of sec. 3 no. 53 of the Energy Industry Act (Energiewirtschaftsgesetz, “EnWG”) in conjunction with sec. 42b EnWG. Via sec. 3 no. 15 GewStG, this extension also applies to German trade tax.
2. VAT in Tenant Electricity Models
Landlords who supply tenant electricity must consider VAT consequences in addition to income tax questions. The question arises as to whether the supply of electricity to tenants is to be classified for VAT purposes as an ancillary service to the letting or as an independent service. The classification determines whether the landlord can claim input tax deduction for related input supplies. Particularly where larger PV installations (> 30 kWp) on residential properties are acquired, the tax consequences are considerable, since input VAT paid by the landlord on the acquisition of equipment would be permanently lost if the supply is classified as an ancillary service. An option to tax would also not be available to the landlord in that case.
The question of when a supply constitutes an ancillary service to a letting or an independent service for VAT purposes was recently decided by the German Federal Fiscal Court in its judgment of 17 July 2024 (XI R 8/21).
In the case at hand, a residential landlord had concluded electricity supply agreements with tenants that were independent of the tenancy agreement in terms of content and duration and could be terminated separately from the tenancy. The electricity was billed via individual sub-meters according to consumption. The tenants would in principle have been free to choose their electricity supplier.
In this specific case, the BFH held that the supply for consideration of self-generated solar electricity to tenants is not an ancillary, non-independent service to the VAT-exempt letting of residential accommodation, but rather an independent, VAT-taxable principal supply. The decisive factors were the free choice of electricity suppliers and the statutory prohibition on tying under sec. 42a para. 2 EnWG, pursuant to which a tenant electricity contract may not form part of a tenancy agreement. Continuing to rely on the existing, not yet revised administrative guidance (A 4.12.1. para. 5 sent. 3 UStAE), under which electricity supplies were generally to be treated as VAT-exempt ancillary services to the letting, is hardly advisable following this judgment.
Where the landlord also purchases residual electricity from the local utility in order to guarantee a full supply to tenants, as required under sec. 42a para. 2 sent. 6 EnWG, it will regularly become a reseller of electricity for VAT purposes within the meaning of sec. 3g para. 1 sent. 1 UStG (Umsatzsteuergesetz, “UStG”). In this case, the reverse charge procedure may apply, under which not the supplying entrepreneur but the recipient of the supply owes the VAT, provided the landlord’s own supplier is also a reseller (sec. 13b para. 2 no. 5 lit. b, para. 5 sent. 4 UStG). The landlord requires a special certificate (USt 1 TH) for this purpose.
3. Electricity Tax in Tenant Electricity Models
From the landlord’s perspective, classification as a (restricted) “supplier” has been an obstacle in tenant electricity concepts. The wide-ranging registration, record-keeping, and reporting obligations associated with this status frequently caused implementation to fail. Structures that allow supplier obligations to be shifted to third parties generally result in the loss of electricity tax reliefs. It is therefore welcome that the legislator has introduced initial alleviations through the Third Act Amending the Energy Tax Act and the Electricity Tax Act.
- No Supplier Status for Operators of Decentralised Small Installations (sec. 1a para. 5a Regulations for the Implementation of the Electricity Tax Act (Verordnung zur Durchführung des Stromsteuergesetzes, “StromStV”))
For many tenant electricity concepts, the burdensome administrative requirements previously linked to supplier status will no longer apply, namely the notification and reporting obligations and the licensing requirement. This is made possible by the newly created sec. 1a para. 5a StromStV, which restricts supplier status.
Accordingly, a person who supplies electricity from renewable energy installations with an output of up to 2 MW on a tax-exempt basis (sec. 9 para. 1 no. 3 lit. b of the German Eletricity Tax Act (Stromsteuergesetzes, “StromStG”) to end consumers, and delivers this electricity exclusively outside the public supply network, will no longer be regarded as a supplier, unless they are to be classified as such for other reasons. A further requirement is that the renewable energy installation is registered in the market master data register. Simultaneously drawing electricity from the grid is also harmless under certain conditions.
An exemption under sec. 9 para. 1 no. 6 lit. b StromStG also suffices where demonstrably taxed energy products are used for electricity generation. This also covers, for example, non-highly-efficient combined heat and power installations.
- New Uniform Installation Concept and Abolition of Cross-Site Installation Grouping (sec. 12b para. 1 StromStV)
Previously, cross-site installation grouping frequently led to the loss of the electricity tax exemption, making cumbersome avoidance structures necessary. For companies with renewable energy installations at several sites, the abolition of installation grouping will remove a further significant barrier to expansion.
This is made possible by the newly drafted sec. 12b para. 1 StromStV, which for the first time contains a universally applicable definition of the concept of an “installation” (Anlage) for electricity tax purposes. Accordingly, multiple electricity generation units are only regarded as a single installation if they are operated by the same operator, at the same site, and using the same technology. Cross-site consolidation, for example because installations are centrally controlled or contracted through the same direct marketer, is no longer provided for. The concept of “site”, which has not yet been conclusively defined, is central and now carries considerable weight.
Anyone who falls under a different licence category as a result of the new installation concept must review what action is required. This includes, for example, applying for a new licence, with deadlines of 30 June 2026 to be observed, or returning an existing licence.
Despite these advances, the unsatisfactory situation under electricity tax law for supply chain models (Lieferkettenmodelle) has not been resolved. The supply chain model was expressly provided for in the German Renewable Energy Sources Act (Gesetz für den Ausbau erneuerbarer Energien, “EEG”) 2021. Under this model, tenant electricity from solar installations can be supplied to tenants not only by the installation operator itself, but also by a third party such as a specialised tenant electricity provider, without the electricity passing through the public grid. The third party acts as an intermediary between the installation operator and the tenants, taking on administrative tasks, in particular concluding electricity supply contracts with tenants, handling energy law matters, and issuing consumption-based bills. This model has been permissible under energy law since 2021 and is supported by the tenant electricity supplement under sec. 21 para. 3 sent. 1 EEG.
Because a third party is involved in the supply chain, the customs administration takes the view that the electricity tax exemption under sec. 9 para. 1 no. 3 lit. b StromStG in conjunction with sec. 12b para. 2 StromStV is not satisfied. This conclusion can be justified by the wording of the legislation, but it is contradictory. A model that the legislator has expressly enabled and incentivised under energy law is not recognised for electricity tax purposes. In practice, attempts are sometimes made to address this by limiting the scope of the service provider’s tasks; however, such workarounds frequently prove difficult to implement and can themselves raise new legal questions.
The electricity tax exemption is also at risk in contracting models (Contracting-Modelle). Close attention to the specific contractual structure is required, which calls for careful analysis.
4. New Investment Law and Investment Tax Law Rules
The Location Promotion Act is intended to remove barriers to investment, including in renewable energies. The amendments made to investment law (Investmentrecht) and investment tax law (Investmentsteuerrecht) also make tenant electricity models available for use by real estate special funds (Immobilien-Sondervermögen).
4.1 Investment Law in Tenant Electricity Models
The investment law amendments relate first to the catalogue of permissible assets that a real estate special fund may acquire. Under the new sec. 231 para. 3 of the German Investment Act (Kapitalanlagegesetzbuch, “KAGB”), both (retail) real estate special funds and open-ended special AIFs with fixed investment conditions may now acquire, in addition to assets required for the management of real property, also assets that serve the management of renewable energies within the meaning of the new sec. 1 para. 19 no. 6a KAGB, or that are required for the operation of electric mobility charging stations.
It has not yet been conclusively clarified whether direct investments in renewable energy installations under sec. 231 para. 3 KAGB always require a connection to real property held in the fund. The prevailing view is that such a real property nexus remains necessary even after the new regulation. Indirect investments may then need to be considered where no such nexus can be established.
In addition, the new sec. 231 para. 6 KAGB provides that such assets, in particular rooftop installations and charging infrastructure, may also be operated by the capital management company for the real estate special fund, which according to the legislative explanatory memorandum expressly includes the sale of the electricity generated. Whether this per se rules out an impermissible operating activity outside the financial sector within the meaning of sec. 1 para. 1 sent. 1 KAGB remains disputed.
4.2 Investment Tax Law in Tenant Electricity Models
Real estate special funds are exempt from trade tax provided that, among other things, they do not actively and entrepreneurially manage their assets to a material extent. This condition is deemed to be satisfied if income from active entrepreneurial management in a financial year amounts to less than 5% of the investment fund’s total income.
Active entrepreneurial management of real estate companies (Immobilien-Gesellschaften) was previously harmless. This exception has now been extended to companies whose corporate purpose is directed at the management of renewable energies within the meaning of sec. 1 para. 19 no. 6a KAGB, to infrastructure project companies (Infrastruktur-Projektgesellschaften), and to public-private partnership project companies (ÖPP-Projektgesellschaften). These are likewise not to be included in the 5% threshold.
The new regulation reduces the administrative burden by avoiding, in some cases, the need to file a trade tax return and to assess a trade tax measurement amount at fund level. It does not, however, as a rule reduce the trade tax burden at fund level. Even under existing law, such income would generally not be subject to trade tax at multiple levels, since in the case of interests in partnerships the extended deduction under sec. 9 no. 2 GewStG applies, and in the case of interests in corporations above the qualifying shareholding threshold sec. 9 no. 2a GewStG ensures a deduction, meaning that only a single level of charge applies at the level of the companies themselves, which continues to remain unchanged.
Additionally, sec. 26 no. 7a InvStG has been redrafted. Previously, this provision allowed, instead of a 5% quota, a higher quota of 20% where the income arose from active entrepreneurial activities in the fields of renewable energies and charging infrastructure. Under the new version, income from such activities will no longer be taken into account, meaning it can no longer trigger a breach. From the new wording and the explanatory memorandum to the government draft, it is clear that the management of renewable energies requires a substantive connection with the letting or leasing of real property, whereby spatial proximity of the installed facilities to the real property may also suffice.
5. Recommendations and Conclusion
The tax rules for tenant electricity have changed comprehensively. The Growth Opportunities Act, the electricity tax reform, and the Location Promotion Act have together created an environment in which running tenant electricity models is, for the first time, also tax-attractive for housing companies and real estate funds.
Whether and to what extent the new scope for action can be used depends critically on the specific project structure, the chosen supply model, and the individual circumstances of the investor. In particular, the interaction of the various tax types, namely German income taxes, German value added tax, and German electricity tax, requires a coordinated overall assessment. Anyone who looks at individual parameters in isolation risks losing advantages elsewhere or triggering unexpected tax burdens.
Tenant electricity concepts are therefore not a standard tax product. They offer considerable potential, but require careful tax law support from the initial structuring decision through to ongoing implementation. We would be pleased to help you seize the opportunities and understand the risks.
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The foregoing statements are for information purposes only and do not constitute legal or tax advice.
For further information, please contact:
Michael Brüggemann, Bird & Bird
michael.brueggemann@twobirds.com
