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In most international tax jurisdictions, in accordance with International Accounting Standards, it is possible to depreciate component parts of a property, such as air conditioning plant and lifts at different rates from the rest of the building. However, this is rarely done.

A combination of property costing, valuation and accounting skills are required to carry out this exercise effectively but most international accountancy practices do not possess these skills in-house.

This results in the entire cost of the property being depreciated at a single composite rate, meaning that significant levels of tax relief are missed.

The following example illustrates the benefit of carrying out a cost segregation analysis over depreciating the building at a single composite rate of 4%.

Property

Call centre in Madrid with a total construction cost of €26.3m




How can Capitus help?

The following approach has been used successfully in many international property investment and development situations.


Capitus will:

  • Advise you on the tax legislation relating to the treatment of property costs relevant to the country in which you are investing.
  • Liaise with your accountants on all relevant local issues.
  • Carry out a detailed survey of the property, if required.
  • Prepare a cost segregation analysis of construction or purchase costs together with an assessment of useful economic life.
  • Submit the cost segregation analysis to your local accountants for submission to the relevant tax authorities.
  • Support the figures in negotiations with the relevant tax authorities where required.


If applied properly, this methodology will result in much greater levels of accelerated tax relief.