Important note: Every effort has been made to communicate the information as accurately as possible, and all pertinent subclauses of tax laws are referenced where applicable. However, please make sure to read the date of publication of this blog post in order to ascertain when it is outdated.
What is the duty payable on?
Electricity duty is an excise duty on electric current. The duty is regulated by federal statute and taxes the consumption of electricity within Germany’s fiscal territory (i.e., the Federal Republic of Germany excluding the territory of Büsingen and the island of Heligoland). The duty originates when electricity is withdrawn from the supply grid in German fiscal territory.
Who is liable for the duty?
As an excise duty, electricity duty is intended to be borne by the consumer. However, collecting the duty from the vast number of consumers is clearly impractical. Therefore, for reasons of administrative efficiency, electricity duty generally attaches to the supplier, who can then transfer the cost to consumers by including it in the price of electricity. Electricity duty law designates suppliers as those who provide electricity to others.
Autoproducers who generate electricity for their own use are also liable for duty. Duty is payable when electricity is withdrawn by the autoproducer for own use.
Finally, consumers themselves are liable for duty if they procure electricity from other countries or withdraw electricity unlawfully from the power grid.
The person liable for duty must file a self-assessed tax return and may generally opt to do so on a monthly or a yearly basis. For returns filed on a monthly basis, the duty for each calendar month must be declared by the 15th calendar day of the following month and paid by the 25th calendar day of that month. For returns filed on a yearly basis, monthly prepayments toward the expected duty liability must be made by the 25th calendar day of each following month. The duty liability for the entire year must be declared by 31 May of the following calendar year and paid, after deducting the monthly prepayments, by 25 June of that year.
How much is the duty?
The duty amounts to €20.50 per megawatt hour (2.05 cents per kilowatt hour). However, the Electricity Duty Act also provides for exemptions and reduced rates of duty in order to promote the use of environment-friendly energy sources and means of transport. The Act also provides relief from the duty to trade and industry in order to prevent German companies from being placed at a competitive disadvantage in relation to their foreign competitors.
Who are exempted from the duty?
The following section describes certain categories of relief from electricity duty. The list is not exhaustive.
Electricity from renewable energy sources
Electricity generated exclusively from renewable energy sources and withdrawn from power grids or transmission lines fed exclusively by renewables is exempt from electricity duty. Renewable energy sources include wind power, solar energy, geothermal energy, landfill gas, sewage gas and biomass, as well as hydroelectric power from hydropower stations with a generator output of up to 10 megawatts.
Electricity used for the purpose of generating electricity is also exempt. This applies to electricity consumed in the auxiliary installations of electricity generation units, especially for the purpose of treating water, supplying water for steam generators, supplying fresh air and fuel, and purifying flue gas; it also applies to the electricity needed by pumps to power storage facilities in pumped storage plants.
Electricity generated by installations with a rated electrical output not exceeding two megawatts is not subject to electricity duty as long as the electricity is
- drawn by the installation operator in the immediately vicinity of the installation and for the operator’s own consumption or
- supplied by the party operating (or commissioning the operation of) the installation to final consumers in the immediate vicinity of the installation.
Trains and trolleybuses
Electricity used to operate trains and trolleybuses is dutiable at a rate of only €11.42 per megawatt hour. The aim here is to strengthen the competitive position of environment-friendly rail transport as well as the local public transport system.
Shore-side electricity supply
For environmental reasons, shore-side electricity supplied to watercraft for shipping (with the exception of private, non-commercial shipping) is taxed at only €0.50 per megawatt hour.
Tax relief for businesses in the manufacturing, agricultural and forestry industries
Under certain criteria, companies in the manufacturing, agricultural and forestry sectors whose annual electricity duty liability exceeds €1,000 receive retroactive tax relief in the amount of €5.13 per megawatt hour. Manufacturing companies subject to high electricity duty costs may also be entitled to an additional refund (called the Spitzenausgleich), which is calculated on the basis of (i) a company’s electricity duty liability and (ii) the rate by which the employer’s share of pension insurance contributions has been reduced. Starting in 2013, this refund is granted only if a company fulfils stringent criteria for improving energy efficiency. These include, in particular, the adoption and operation of energy or environmental management systems or, in the case of small and medium-sized businesses, the adoption and operation of alternative systems to improve energy efficiency.
Since 2006, additional tax relief measures have been introduced that allow certain energy-intensive processes in manufacturing to be fully exempt from electricity duty. The aim here is to safeguard the international competitiveness of German industry.
Who collects the duty?
Electricity duty is collected by the Federal Customs Administration, and the revenue accrues to the Federation.