Weismann Tax Firm

Elena Weismann
Graduate Economist, Tax Consultant
Certified Consultant for International Tax Law

Acquisition-related production costs by elimination of hidden defects after acquisition of real estate

by Elena Weismann in News from tax law

Unexpected expenses for renovations after the acquisition of a property also result in production costs close to acquisition cost if other conditions are met.Construction measures carried out by a property purchaser within three years of the acquisition of a property regularly result in acquisition costs if the expenses, excluding value-added tax, amount to more than 15% of the building value (acquisition-related production costs). This also includes renovation measures carried out only to eliminate defects caused by the tenant’s contractual use or to eliminate hidden defects, i.e. defects that remained hidden in the course of the acquisition but were preexisting. Explicitly not at acquisition-related production costs result in expenses for extensions and maintenance work which usually incur annually.

Note. Costs for repair measures to fix damage which can be proven to have been caused by culpable action of a third party on the building only after the acquisition of the property, are not subject to the normal assumption for the existence of acquisition-related production costs.

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