Claim input tax on operating expenses for residential and commercial buildings.
July 11, 2016 | 30,00 EUR | answered by Oliver Burchardt
Dear Sir or Madam,
I am running a business in the IT sector and have recently built a residential and commercial building. This house is fully networked (KNX system) and is also intended to be used as a demo house for my business. The house is 160 square meters in size. My question is therefore how much of the input tax and costs incurred can I claim as operating expenses from the tax office, and what disadvantages could arise for me in doing so?
Dear questioner,
Thank you for your response, which I would be happy to answer as part of an initial consultation.
In principle, you can deduct all costs incurred in connection with your business from taxes. The same applies to input tax.
You have purchased a so-called mixed-use asset. Therefore, you must allocate the construction costs in a reasonable proportion to the private area (i.e. the apartment) and the business area.
Normally, the allocation key is simple: you take the total area and determine the proportion of residential and commercial space. You multiply the costs by the proportion of the commercial area and thus determine the proportion of deductible costs.
In your case, this is probably not quite appropriate. From a distance, I would advise you in the first step to deduct the costs for the networking of the house from the total sum of costs. In the second step, you then determine the deductible proportion from the remaining costs as described above. In the third step, you add the networking costs back in and have determined the deductible costs.
This will not initially result in any disadvantages for you, only if you sell the house, you will also have to divide the sales proceeds in the same way and compare them with the remaining book value of the business portion. If a profit is made, it is taxable.
Another note: In my opinion, your case will not be straightforward at the tax office. They will likely take the position that the costs have been erroneously divided between private and business portions (of course, to your disadvantage!). I recommend that you seek more detailed advice from a local tax advisor than is possible through an online platform. You must provide documentation that makes the allocation unquestionable for the tax office, and I believe that this could be a difficult task for a tax layman.
Best regards,
Oliver Burchardt
