A second solar park: one business or two? What it means for the IAB, trade tax and VAT

Many investors start with one park or one parcel and add the next one or two years later. At that point the tax adviser asks the question nobody asked about the first investment: does the new park run within the existing business or is it a business of its own?

You do not get to choose the answer. It follows from the case law on whether several activities form one business or several (Einheit und Mehrheit von Gewerbebetrieben), and for two solar parks that case law is fairly clear. What follows from it is less well known: with the investment deduction (Investitionsabzugsbetrag, IAB) under § 7g EStG the amounts at stake can run to six figures, with trade tax (Gewerbesteuer) usually to a few hundred euros a year.

When are two solar parks one business for tax purposes?

Almost always when the same person holds them. An individual can run several trade businesses side by side, unlike a GmbH or a partnership. Whether that is what is happening is tested by the courts in two steps: are the activities of the same kind or of different kinds? And how closely are they linked economically, organisationally and financially (Federal Fiscal Court, judgment of 17.06.2020, X R 15/18)?

For activities of the same kind there is a presumption: they form one business unless very special circumstances speak against it. The presumption is only rebutted where there is practically no link; not even all three criteria need to be present. For activities of different kinds it is the other way round, they are treated as separate businesses in case of doubt. Between the two there is no sharp line but a sliding scale: the more different two activities are, the closer the link has to be for them to form one business.

Two parks that generate power and feed it into the grid sit at the very start of that scale. The Federal Fiscal Court confirmed this in 2022 for eight solar installations at two sites a good four kilometres apart (order of 13.06.2022, X B 148/21). Each installation had its own inverters, its own feed-in contract, its own insurance and its own financing. The court nevertheless found an activity of the same kind, “even identical”, and a single business. What was missing was a separate sphere of activity, own staff, separate bookkeeping, own administration and, which it called particularly decisive, a customer base of its own.

Two points from this matter for investors. First, the installation concept of the Renewable Energy Sources Act (EEG) does not help: that two parks are separate installations with separate grid connections under energy law is irrelevant to the tax question. Second, with two parks the customer is almost always the same, namely the grid operator or a direct marketer. A separate customer base per park is therefore hard to argue.

What did the Federal Fiscal Court decide in January 2026?

It confirmed the standards and sharpened them for the case where a business is added (judgment of 28.01.2026, X R 8/23). The claimant ran his own business and, as heir, took over his mother's business at the same site. He kept separate bookkeeping, accounts, tax numbers and trade tax returns and claimed investment deductions above the single cap because he wanted to use it twice. The tax office saw a single business, cut the deductions and issued only one trade tax assessment.

Three statements in the judgment matter beyond the individual case. The test also applies where a previously independent business is added to an existing one. Whether there are one or two businesses does not depend on the taxpayer's intention: an organisational decision has to be objectively ascertainable and actually carried out (para. 25). And the court must base its assessment on established facts; assumptions are not enough. The fiscal court failed on this last point, and the Federal Fiscal Court referred the case back.

So this is not a “two businesses” ruling. The investment deductions had all been reversed during the appeal anyway, and the court no longer had to decide on the double cap. Whether one trade tax allowance applies or two remained open. For investors this means: separate accounts and a second tax number do not by themselves create a second business if the activity is the same.

How much IAB is still available for the second park within the same business?

That depends on whether the IAB for the first park has already been used. The cap of 200,000 euros applies per business (§ 7g para. 1 sentence 4 EStG). In the deduction year it is reduced by the deductions of the three preceding financial years that are still “present”, meaning neither added back on an investment nor reversed (Federal Ministry of Finance circular of 15.06.2022, para. 10). Two parks in one business share this single limit.

Our own calculation with two parks of 400,000 euros each: the investor claims an IAB of 200,000 euros for park 1 in 2026 and wants to claim an IAB for park 2 in 2027.

As long as the projects come one after the other and each park is acquired in the year after the deduction, the shared limit is not a problem: the add-back frees it up again. It gets tight when a project is delayed or two parks are planned in parallel. Then the open IAB of the first blocks the deduction for the second, and the second deduction slips back by a year. How several vintages can be staggered over time is shown in using the IAB every year.

There is also good news. Within the same business, the IAB you claimed for park 1 may be allocated to park 2: since the Annual Tax Act 2020, which deductions you allocate to which investment is your choice (circular, para. 24). If park 1 falls through and park 2 is acquired within the deadline instead, the deduction stands.

The profit limit of 200,000 euros also applies per business (§ 7g para. 1 sentence 2 no. 1 b EStG, circular paras. 13 and 15), so for both parks together. In practice it rarely binds for solar parks: at an assumed profit ratio of 5 to 7.5 per cent of acquisition costs, operating parks together only reach a profit of 200,000 euros from around 2.7 to 4 million euros of acquisition costs. Deductions and add-backs under § 7g do not count here; which profit is otherwise relevant is set out in IAB requirements.

Can an IAB move from one business to another?

No. The IAB is claimed for an asset used in a domestic permanent establishment of the business (§ 7g para. 1 sentence 1 EStG), and the tax authorities test the retention and use periods per business: if the asset is used more than 10 per cent in another business of the taxpayer, that is harmful (circular, para. 45). It follows that an IAB claimed in business A cannot be used for an investment in business B. The circular does not say this in so many words, but it follows from the statute and para. 45.

For investors this matters mainly where an IAB was claimed in the business of a medical or law practice or another trade and a park is then to be acquired in a new, separate investment business. The matching investment is then missing, and the deduction is reversed in the original year, with interest under § 233a AO. How that works is described in Reversing the IAB: what happens if you don't invest, deadlines, interest, ways out.

What changes for trade tax?

Less than the second allowance suggests. Individuals have an allowance of 24,500 euros per trade business (§ 11 para. 1 sentence 3 no. 1 GewStG); two businesses would have two (Federal Fiscal Court, judgment of 24.10.2012, X R 36/10, para. 28). Trade tax, however, is credited against income tax under § 35 EStG, at four times the base amount (Messbetrag) and at most up to the trade tax actually paid. That limit is determined per business (Federal Fiscal Court, judgment of 20.03.2017, X R 62/14).

Our calculation for a year in which each park makes a profit of 30,000 euros:

Up to a multiplier of 400 per cent the trade tax is credited in full, and the second allowance is worth nothing. Above that a remainder is left, and the second allowance saves at most 24,500 euros times 3.5 per cent times the part of the multiplier above 400 per cent: 429 euros a year at 450 per cent. Higher profits do not increase it. Income tax itself does not change, because it covers the trade income of both parks together in any case.

Loss offsetting works in the other direction. In its acquisition year a new park often makes a loss because of special and declining-balance depreciation, 80,000 euros in our example. Within a single business it is offset immediately against the profit of park 1, and the remainder is carried forward. As a separate business, park 2 carries its loss forward only for itself (§ 10a GewStG; X R 36/10, para. 29). At usual multipliers these are small amounts too, but they show that a second business would not be a pure advantage. How multiplier, allowance and credit interact in detail is explained in trade tax in a direct investment.

What happens if the parks are in two municipalities?

Then the base amount of the one business is apportioned between both municipalities and the place of management (§ 28 GewStG). For businesses that operate solar installations exclusively, a special key applies: one tenth by wages, nine tenths by installed capacity (§ 29 para. 1 no. 2 a GewStG). For a sole trader, a flat 25,000 euros is counted as wages (§ 31 para. 5 GewStG), at the place where the business is managed, which for an investor is usually the place of residence.

Tax is paid to three municipalities and credited once: 4,970 euros, leaving 99 euros. The effort lies more in the apportionment return than in the tax itself.

And if the second park is a battery storage system?

Then the answer is open. There is no ruling on a solar park and a battery storage system in the same hands. A storage system does not generate power; it takes it in, releases it at other times and often markets balancing capacity. That points rather to an activity of a different kind, and so to the reverse presumption. If, on the other hand, the storage system charges from the park at the same site, the two complement each other economically, which points to one business. A storage system at another site with its own marketer comes closer to two businesses.

One consequence can already be read from the statute: the special apportionment keys only apply to businesses that operate exclusively solar installations (§ 29 para. 1 no. 2 GewStG) or exclusively energy storage (no. 3). A mixed business meets neither; how it is then apportioned is a case-by-case question. Anyone adding a storage system to a park should therefore settle the business question with their tax adviser before investing. How storage at a park differs from stand-alone storage is shown in Co-located vs. stand-alone: which gives the better risk structure.

Does the same apply for VAT?

No, there the question is settled before it arises. The enterprise within the meaning of the VAT Act covers the entire commercial and professional activity of the trader (§ 2 para. 1 sentence 2 UStG). Two parks, a storage system and a professional practice are one enterprise for VAT, with one advance return and one annual return. The small business thresholds of 25,000 euros in the previous year and 100,000 euros in the current year (§ 19 para. 1 UStG) refer to the total turnover of all activities. For solar parks the small business rule rarely plays a role anyway; why is explained in VAT in a direct investment.

What has to be done formally for the second park?

• Trade office: the start of a business has to be notified, but so does the start of a branch and the extension of the trade (§ 14 para. 1 GewO). Whether a registration or an amendment fits the second park is for the municipality to say.
• Municipality and tax office: anyone opening a permanent establishment notifies the municipality where it is located; the municipality informs the tax office (§ 138 para. 1 AO). The further information in the tax registration questionnaire is tied by statute to the opening of a business (§ 138 para. 1b AO). Whether a separate tax number is issued is administrative practice, not a statutory rule.
• Profit calculation: a separate Anlage EÜR has to be filed for each business (instructions for Anlage EÜR 2025). Two parks in one business therefore appear in one profit calculation, ideally with separate revenue accounts.
• Bookkeeping obligation: the thresholds of 800,000 euros turnover and 80,000 euros profit apply to the individual business (§ 141 para. 1 AO). Two parks in one business reach them sooner.
• Trade tax: one assessment of the base amount for the business, with apportionment if two municipalities are involved.

What the first questionnaire looks like and which authority is responsible for what is described in Tax registration questionnaire and trade registration for a PV direct investment: which authority needs to know what, and by when.

Is it worth setting up two businesses on purpose?

With two solar parks usually not, and it rarely succeeds. It is not prohibited: there is no ruling or circular treating the split into two businesses as an abuse of law. The hurdle lies elsewhere. For activities of the same kind, the case law requires that the businesses are essentially linked only through the person of the owner (X B 148/21, para. 14). Separate accounts, a second tax number and a second trade registration are not enough for that; in the 2022 order the court did not even consider separate contracts, insurance and financing sufficient.

Add the result of our own calculation: on trade tax a second business brings a few hundred euros a year and costs the immediate loss offset. The real lever would be the second IAB cap, and that is exactly what the tax office challenged in X R 8/23. Anyone who needs a larger deduction plans the timeline so that the first IAB is used before the second.

It is different where the activities really differ. A medical or law practice and a solar park are separate simply because of the type of income, and a retail business and a park are separate too under X R 36/10.

What applies if only one of the parks is sold later?

Then the gain is usually ordinary profit, not a privileged capital gain. § 16 EStG privileges the sale of a sub-business (Teilbetrieb), a part with a certain degree of independence. In X B 148/21 the installation sold was not a sub-business, so the gain was also subject to trade tax. The court had drawn the same line earlier for one of three wind turbines. What else to consider when selling a direct investment is set out in Selling a direct investment early: how liquid an energy direct investment really is.

The reverse applies when buying: anyone who takes over an operating park in addition to their own is subject to the same standards under X R 8/23. For an activity of the same kind, the presumption is that the acquired park becomes part of the existing business. What else changes when buying an operating installation is covered in Existing solar park or new build: what changes when the plant is already running?.

Which questions should you clarify before the second park?

• When is park 1 expected to be acquired? Will its IAB have been added back by the time the second deduction is planned?
• How much of the cap is still free in the current year, counted over the deduction year and the three preceding years?
• Are both parks in the same municipality? If not: what are the multipliers, and who prepares the apportionment return?
• Is the second component a battery storage system? Then clarify in advance whether there are one or two businesses and how apportionment works.
• What does the trade office need, and is an amendment of the registration sufficient?
• Does the business reach the bookkeeping thresholds with both parks?
• Is there a practice, firm or other trade in which an IAB has already been claimed? In which business is the park to be used?

How we approach the second park in the initial consultation

Investors who come to us for a second time bring the figures of their first business. We lay the investment calendars of both parks side by side: when which IAB was claimed, when the first park will be acquired and what limit remains for the second. If the second deduction does not fit into the current year, that is rarely a loss but usually a delay of one year. Whether there are one or two businesses and how that is reflected in the tax return is for your tax adviser to decide; we provide the project data for it. That is exactly what we review in a no-obligation initial consultation. We do not give return guarantees.