Critics have attacked the German government for tabling new legislation designed to encourage more use of solar panels on commercial properties, describing the proposals as inflexible and “erratic”.

If passed into law, the 2022 Annual Tax Act will allow property funds to earn 10 percent of their revenues from photovoltaic rooftop systems without risking to lose their tax transparency status. At present property funds risk losing their status if they generate more than 5 percent of their income from solar panel use. The German government currently classifies this activity as “active entrepreneurial management”.

Losing tax status can be dramatic for a property fund in Germany as it means it would have to pay trade tax on its earnings, as well as cor-porate income tax. In addition, it would also be taxed for its hidden reserves — in other words, asset appreciation.

Although the change in law would mean that thousands of assets held in German property fu