Acquisition-related production costs vs. maintenance expenses
January 9, 2012 | 30,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
Dear Sir or Madam,
I need your help in determining the 15% threshold for a property that is used for both personal use and rental purposes.
Here are the relevant details:
a) Transfer of ownership: 7th November 2011
b) Purchase price including acquisition costs (TEUR 580 plus TEUR 43.5) TEUR 623.5
c) Land value according to BORIS: 655 sqm * 500 EUR/sqm = TEUR 327.5 plus proportional acquisition costs TEUR 24.5 = TEUR 352
d) Building value including acquisition costs = TEUR 271.4
The building was fully rented out to third parties until the end of April 2012. From May 2012, we will move into the ground floor apartment ourselves, so that 1 apartment (40% of the living space) is for personal use and 3 apartments (60% of the living space) are rented out to third parties.
In the context of planned maintenance expenses, the question arises about the level of the 15% threshold for determining whether acquisition-related expenses or immediately deductible maintenance expenses are applicable.
Is the 15% value calculated based on the total building value in the case of personal use and rental of the property?
-- here: 15% of 271,438 = 40,716
What is the maximum allowable net value for maintenance expenses based on the information provided, taking into account the 15% threshold? How is the allocation made to the rented out portion?
Planned maintenance and modernization works are intended to be directly attributable to individual apartments (e.g. window replacement costs TEUR 30, with TEUR 20 allocated to the personally used apartment and TEUR to a rented apartment) as well as works that can be allocated to individual apartments through a distribution key (e.g. roof renewal costs TEUR 40, with TEUR 16 allocated to the personally used apartment). How should these previously mentioned expenses be allocated to the 15% threshold in terms of amount?
Thank you very much.
Dear Client,
Thank you for your inquiry, which I would like to answer based on your information and in the context of your commitment to an initial consultation as follows:
The issue is much more complex than you assumed.
The 15% limit is fundamentally related to the building, so the 15% limit should be compared to the total acquisition costs of the building. There is a ruling from the tax office ODF-Rheinland dated 06.07.2010, where the administration states in paragraph 5 that the statutory text § 6 paragraph 1 no. 1a EStG exclusively refers to the building as the reference size. However, the Federal Fiscal Court (BFH) decided on 25.09.2007 (BFH NV/2008 p. 272) that if the building is rented out for commercial and residential purposes, there are 2 assets and the 15% limit must be separately checked for each asset.
In addition to the mentioned principles, the tax authorities are increasingly checking whether a renovation is carried out in installments within 5 years and thus exceeds the 15% limit. Such a case would occur if heating, plumbing, windows, and electrical installation are upgraded to standard in the 4th or 5th year after acquisition. Further details are described in the BMF letter dated 18.07.2003 (BStBl. 2003 I p. 386). This legal opinion is controversial and may need to be clarified through legal action.
If you want to be completely sure, you should stay below the 15% limit within the first 3 years and refrain from further standard improvements on heating, plumbing, windows, and electrical installation parts of the building within 5 years after implementing the planned measures, and carry out these measures only after the 5-year period I mentioned.
Before starting the construction work, you should consult a tax advisor in detail, as there are many pitfalls.
I hope that my initial assessment of the problem has helped you.
Best regards,
Ulrich Stiller
Tax Advisor/Diplom Business Administrator
