Depreciation of production-related acquisition costs
November 26, 2013 | 25,00 EUR | answered by Michael Herrmann
Good day.
After acquiring a commercial building that is to be used for business purposes, extensive renovation and modernization measures were carried out. The building was purchased at a very low price and a multiple was invested (the 15% limit has been exceeded), so it is probably considered acquisition-related production costs that can be written off.
The building was acquired in January 2012, and the renovation measures span over a period of 18 months.
If I understand correctly, the building can be depreciated from January 2012, right (depreciation rate 3%)?
How does the depreciation of production costs work? Only after the completion of all measures (so from July 2013 or by the end of 2012), or already proportionally from the month in which the costs were incurred?
I look forward to your response.
Dear inquirer,
First of all, thank you for your inquiry, which I would be happy to answer based on the information provided and in the context of your situation as part of an initial consultation. The response is based on the facts presented. Missing or incorrect information about the actual circumstances can affect the legal outcome.
As you correctly identified, there is an issue of capital expenditure related to the acquisition. According to recent jurisprudence, acquisition costs also include expenses to put the building into a usable state for operation. Operational readiness in this context refers to the readiness for intended use.
If the building was operational at the time of acquisition, the acquisition costs for the building can be depreciated from the time of acquisition. Subsequent expenses are then considered subsequent production costs, which are depreciated from completion (on a monthly basis).
If the building was not operational at the time of acquisition, the subsequent expenses also form part of the acquisition costs. In this case, the total expenses from the acquisition and renovation of the building should only be depreciated from the time of achieving operational readiness (on a monthly basis).
I hope that this information has provided you with a sufficient overview of the situation in the context of your situation and this initial consultation.
Kind regards,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax advisor
