One of Europe’s leading developers of logistics and industrial properties built a large distribution warehouse facility in Spain, where business property is commonly written-down for tax relief on a straight-line basis at 3% per annum. But we were able to accelerate the tax relief to 6.43% a year by using our specialist surveying and tax skills to prepare a cost segregation analysis that categorised the client’s expenditure into various asset classes. This more than doubled the annual tax relief.
Work highlight / 8 Jul 2021
International tax depreciation and the benefits of undertaking a detailed cost segregation analysis
Insight shared by:
What is an international tax depreciation analysis?
In many international tax jurisdictions, following International Accounting Standards, it is possible to depreciate component parts of a property, such as air conditioning plants, lifts or electrical equipment more quickly than the structure and shell of the building.
How did we help?
The client:
Overseas developer and investor
The works:
The works comprised the development of a large high-specification logistics centre in Spain, with office and welfare facilities. Externally there was a secure yard with access to the building through dock levellers and automatic roller shutter doors.
The problem:
Tax depreciation specialists do not exist in many jurisdictions which often means that the entire cost of the property is depreciated at a single low composite rate overlooking significant levels of enhanced tax relief. In this example, the client’s overseas tax advisors intended to depreciate the whole property at a single rate of 3% per annum.
Value of international tax depreciation analysis and cost segregation:
Using a specialist methodology and combination of property costing, valuation and accountancy skills we analysed the total development expenditure of nearly €30m and segregated it into its component elements, writing-off each for tax purposes at the optimum rate available. This accelerated the annual tax saving from around €200k to almost €500k.
In conclusion:
Analysis and coordination by an experienced tax depreciation specialist allows you to optimise the tax relief claim by segregating property expenditure into its components and writing-off each for tax purposes at the optimum rate available in that particular jurisdiction.
What you need to know
If you are an investor buying, developing, or refurbishing a commercial property overseas, where the income is taxable in that foreign jurisdiction, our international tax depreciation and cost segregation services can maximise and accelerate the tax relief available to:
- Reduce current and future tax liabilities
- Improve cash flow
- Free up capital for further investment
Interested in finding out more about international tax depreciation?
We specialise in international tax depreciation cost segregation analysis and are happy to undertake a no-obligation review of any development to give an assessment of the relief available. Visit our web page to get in touch.