Trading in so-called GHG allowances offers companies and individuals a new source of income and creates new business opportunities for the automotive sector
The proportion of electric passenger cars on Germany’s roads is rising significantly, both in the private and commercial sectors. In 2022 alone, over 470,000 electric cars were newly registered in Germany, accounting for 17.7% of all newly registered passenger cars. As an additional tool for achieving the climate targets set by policymakers and promoting climate-friendly mobility, so-called greenhouse gas reduction quotas (GHG quotas) were introduced, requiring companies that emit greenhouse gases to offset these emissions (financially).
These so-called GHG quotas are certified by the Federal Environment Agency following prior registration and are treated as certificates. They are also available to all private owners of all-electric vehicles. These can be sold to companies that emit greenhouse gases. To make the otherwise very time-consuming process of companies buying and selling individual certificates on the market more efficient, these are generally first bundled by intermediaries (so-called pooling companies) and then resold in larger quantities. Vehicle owners typically receive a fixed payment from the intermediary for their GHG quota; depending on the intermediary’s business model, variable payments may also be agreed upon. The payment is based on the CO₂ savings potential and varies depending on the vehicle class. In some cases, the pooling companies also handle the registration of the vehicle with the Federal Environment Agency.
From a tax perspective, at the time the GHG quota is transferred by the vehicle owner—either through the transfer of the certificate or through registration of the vehicle in the pooling company’s customer portal—a “purchase price” receivable arises for the selling certificate holder (passenger car owner) against the intermediary (pooling company). From a balance sheet perspective, the acquiring intermediaries purchase these rights (and subsequent certificates) as intangible current assets, which are subsequently resold as approved certificates to buyers—such as oil companies—thereby generating revenue. Revenue recognition for the intermediary under both commercial and tax law occurs at the time the rights or certificates are transferred to the customers. This aligns with the “revenue recognition” principles of international accounting standards (IFRS 15).
For VAT purposes, GHG allowance transactions generally constitute a taxable transaction, provided that the seller—whether the holder of the rights or the certificate—is a business for VAT purposes. In such cases, the standard VAT rate of 19% applies. Private owners of electric cars generally do not act as taxable businesses for VAT purposes. In the case of a variable compensation model with the pooling entity, it is necessary to make a reasonable estimate of the revenue at the time the service is rendered.
If the electric vehicle whose GHG quota is being sold is classified as a business asset, the proceeds from the sale of the GHG quotas constitute taxable income or operating revenue under general principles, increase the taxable income, and are part of the income from business operations; as such, they are also subject to trade tax.
However, if the vehicle is an electric vehicle held as part of one’s personal assets, current legal interpretation holds that the proceeds received from the sale of the GHG quota do not constitute any type of income and are therefore generally tax-exempt.
