Acquisition-related manufacturing costs
December 2, 2010 | 30,00 EUR | answered by Michael Herrmann
Hello!
It is about acquisition-related production costs within three years after the purchase of a multi-family house and the 15% threshold. Below 15% fully deductible as advertising costs, above 15% allocation to the acquisition costs and consideration via AfA.
Now I have come across the following information:
Caution trap: Five-year period also possible! If construction measures are part of an overall measure that is planned to last several years (so-called renovation in installments), a five-year period must be observed."
Question: A new heating system was installed, with the provider of district heating connection and station granting a loan that is repayable in 60 monthly installments, so it runs over 5 years. Does this also fall within this five-year period, even though it is a installment payment and not a construction measure? And can the tax office possibly determine a "overall measure" after 5 years?
Can these payments over 5 years be deducted annually (in my opinion, only the money actually paid in the year can be stated) or does the price for the system have to be declared completely in the year of acquisition? Without these installments, which would still be payable after the expiration of the three-year period, we would just stay below the 15% threshold.
In a rental apartment, windows (some used) and bathrooms were renewed and the heating system was newly installed (previously storage heaters). Do these measures automatically fall under the AfA or are they also considered advertising costs below the 15% threshold?
Best regards
Dear questioner,
First of all, thank you very much for your inquiry, which I would like to answer based on your information and in the context of your commitment to an initial consultation. The response is based on the factual description. Missing or incorrect information about the actual circumstances can affect the legal outcome.
Expenses for renovation and modernization measures after the acquisition of a building are considered acquisition costs if they - without value-added tax - amount to more than 15% of the acquisition costs of the building within three years, so-called acquisition-related production costs. They must then be added to the acquisition costs of the building and depreciated together (§ 6 para. 1 no. 1a in conjunction with § 9 para. 5 sentence 2 EStG).
If the expenses stay below this threshold, they are considered maintenance expenses and can be fully deducted as advertising costs.
The three-year period starts with the acquisition of the building and ends exactly three years later. Three calendar years are not relevant.
When determining the 15% threshold, "expenses for maintenance work that usually occurs annually" are excluded (§ 6 para. 1 no. 1a sentence 2 EStG). However, due to a new Federal Fiscal Court ruling, this statement should be approached with caution (Federal Fiscal Court ruling of August 25, 2009, BStBl. 2010 II p. 125).
To prevent expenses within the three-year period from exceeding the 15% threshold, construction measures could be completed, accepted, or billed later. Therefore, tax authorities have discussed whether the start, individual construction phase, or completion of the construction measures is relevant within the three-year period (LfSt Bayern from August 6, 2010, S 2211.1.1-4/2 St32).
Expenses for construction measures that are not completed within three years after the acquisition of the building are to be considered to the extent that they relate to services provided within the three-year period. The construction measures do not have to be completed, billed, or paid by the end of the three-year period. This is intended to prevent circumvention of § 6 para. 1 no. 1a EStG, e.g. by delaying the completion of construction measures, late acceptance of work services, or late payment.
In the context of an overall measure, a longer period than three years can also have tax consequences. Whether this specifically affects a five-year period, I cannot confirm.
However, with acquisition-related expenses, it is not the timing of payment that matters, but the timing of the construction measure. The consideration is done through depreciation and therefore independent of the cash flow.
In general, the measures you mentioned should all be attributed to maintenance expenses, which, when exceeding the 15% threshold, lead to depreciable acquisition-related expenses. You should try to classify the new heating system as production costs (raising the standard of living). The heating system will then be depreciated over 50 years. The remaining maintenance expenses can then be deducted immediately or evenly spread over a period of five years.
At least this way, you would have "rescued" these expenses before the long depreciation period.
I hope that with this information, I have provided you with a sufficient overview of the situation in the context of your commitment and remain
Yours sincerely
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax consultant
