Classification for tax purposes
If an e-charging station is constructed for business purposes on the company’s property or building then it will be a business asset. In such a case, it is unimportant whether the company owns the property or building or has merely leased it. For tax purposes, the following allocation within business assets is relevant:
- (1) operating equipment,
- (2) tenant installation, or
- (3) a component of the building or a standalone part of the building.
(1) The crucial factor for the reporting and measurement of the asset is the company’s business purpose – if this is supplying electricity, in particular, as charging current for electric vehicles then the e-charging station would constitute operating equipment that should be accounted for and depreciated independently of the building or the car park. In the case of a different business purpose the e-charging station would not constitute operating equipment.
(2) If the company, as a tenant, installs the e-charging station in a third-party building then this could be a so-called tenant installation if the commercial operations through the charging station are carried out directly by the company. Depreciation would be charged similarly to operating equipment. Consequently, as an own capital asset, the e-charging station can be accounted for separately from the building, on a standalone basis, and can be depreciated over a shorter expected useful life than the building (see section "Useful life of charging stations").
(3) If the charging station constitutes neither operating equipment nor a tenant installation then a check should be performed to determine whether it can be regarded as a component of the building or a standalone part of the building. Where there is a common use and function that is shared with the building and the e-charging station then this would constitute a component of the building. The asset would then be recognised in a similar way to the depreciation of a building over a period of up to 33 years.
Useful life of charging stations
After agreement was achieved between the Federal Government and the German federal states, Thuringia’s Ministry of Finance published a decree for tax purposes, on 15.3.2021. In this respect, the average useful life that can be assumed for tax purposes for wallboxes or wall connectors as intelligent wall-mounted charging stations for electric vehicles as well as for publicly accessible charging infrastructure (such as charging stations in public car parks) is a period of six to ten years in the case of a standalone asset. By contrast, under German commercial law it is possible to take a different useful life as a basis. The sole criterion is the length of time that the charging station can probably be able to be used by the company.
Please note: Mobile charging stations that are not firmly affixed to the ground constitute movable standalone assets. The depreciation will therefore be independent of the depreciation period for a building and, thus, is frequently shorter.
(No) maintenance expenses
If an e-charging station is only installed later in a parking area then no immediately deductible maintenance expenses will be assumed but, instead, there will be subsequent acquisition costs. Adding a charging station at a later date constitutes a substantial improvement because the parking space will now have been significantly expanded beyond its original use and can be used together with the e-charging station. By contrast, the subsequent servicing and maintenance expenses for a charging station added at a later date will be immediately deductible.
Renting out e-charging stations
Operating an e-charging station constitutes a commercial activity. That is why a tax consultant should normally review an asset management activity (e.g., letting out residential property) beforehand in order to determine if the new activity would result in the ‘infection’ of such income. If this is the case then the income generated from letting out residential property would also be commercial income. This could result in a higher trade tax burden if the extended trade tax exemption for property is refused. Through the Fund Location Act, together with Section 9 no. 1 sentences 3 and 4 of the Trade Tax Act, German lawmakers correspondingly introduced a harmlessness threshold of 10% as of 2021. According to that, the extended trade tax exemption for property would not be refused if the income from supplying electricity via charging stations is no greater than 10% of the total income from making the property available for use.
Please note: An alternative would be to rent out the e-charging station via a different company from the asset management company in order to be able to exclude the possibility of a ‘harmful infection’.