Changes to tax depreciation of photovoltaic power plants
In connection with the amendment to the Energy Act, changes have been made to the tax depreciation of photovoltaic power plants. On 1 August 2025, the special method of depreciating these plants or their technological parts under the Income Tax Act was abolished.
We already addressed this in the February issue of Tax and Legal Update.
Under to the current wording of the Income Tax Act, the technological parts of photovoltaic power plants are depreciated for tax purposes according to a special provision, on a straight-line basis over a period of 240 months, while the construction parts are classified in the relevant tax depreciation group and depreciated on a straight-line or declining-balance basis over the relevant period.
Under the new rules, both the construction and the technological part will be classified into tax depreciation groups and depreciated on a straight-line or declining-balance basis over the minimum period specified by the Income Tax Act. This amendment thus essentially restores the legal situation before 1 January 2011.
The amendment will not affect plants for which depreciation started before 1 July 2024. Taxpayers will continue to depreciate such plants using the special depreciation method (straight-line monthly depreciation over 240 months). For plants whose depreciation started between 1 July 2024 and 31 July 2025, taxpayers may either continue to apply the special depreciation method or choose a new method of depreciation using the classification into depreciation groups.
If taxpayers choose to switch to the new method, they must apply it from the tax depreciation’s commencement and may therefore be required to file an additional corporate income tax return.
If the taxpayer starts tax depreciation after the amendment comes into force, i.e. after 1 August 2025, they will only be able to depreciate the assets used to produce electricity from solar radiation on a straight-line or declining-balance basis according to the classification of the assets into relevant depreciation groups.
On 13 June 2025, the General Financial Directorate issued a communication explaining in detail the practical procedure for the implementation of the changes described above.
As before, with the exceptions described below, a photovoltaic power plant will need to be divided into its construction and technological parts. For the purposes of the Income Tax Act, the technological part of a PV plant is considered to be a production or special-purpose facility that does not form a single functional unit with the building even if it is firmly connected to it.
The construction part of the photovoltaic power plant comprising the fixed structures and related building parts will be classified as before using the CZ-CC classification and depreciated in the appropriate depreciation group as a separate building or as part of another building or technical improvement to another building. Typically, this will be depreciation group 4 to 6.
The technological part comprising photovoltaic panels, inverters and switchboards will now have to be classified according to the CZ-CPA classification and depreciated separately from the construction part. It will be possible to classify either the individual assets separately or the entire technological part of the power plant as a single asset, i.e., a set of tangible movable assets. This set will be classified into a depreciation group according to the main functional object, which will usually be photovoltaic panels or inverters. Most often, the assets forming the technological part will therefore be classified in depreciation group 3 or 2.
Batteries are not considered to be part of the technological part of a photovoltaic plant. These are used to store the produced electricity and not to produce it. Therefore, they will always need to be classified separately and included in depreciation group 2 under the CZ-CPA classification.
Different rules will apply in two specific situations:
- If the photovoltaic power plant is a source of electricity for a specific building under building regulations, is a facility firmly connected to the building, and its dismantling would lead to the deterioration of the function and purpose of the building, the technological part of the plant will also be depreciated as part of the building.
- If the building authority limits the duration or lifetime of the PV plant by its decision (temporary construction), this limitation should apply to the entire PV plant, i.e., both the construction and technological part. Thus, the whole PV plant should be depreciated on a straight-line basis over a fixed period.
However, the GFD declares in its communication that to maintain the stability and continuity of its application practice, even for temporary constructions of photovoltaic power plants it will respect the classification of the technological part of the PV plant as a separate asset into the relevant depreciation group(s) (and its corresponding depreciation according to the classification) and the depreciation of the construction part separately over the lifetime of the temporary structure.