Tax Advantages. Direct Cash Subsidies

Transcription

1 How to combine Tax Advantages and Direct Cash Subsidies in Germany 1

2 German subsidies law provides with regard to expenses for the maintainance of monuments: Tax Advantages In case of renting out of a monument by private owners in kind of increased depreciation on the money spent for the restoration and maintainance of an historical building at 9% for 8 years (for the year of the restoration and 7 subsequent years) è 72% and at 7% for 4 years (subsequent years) è 28% In total 100% write-off in 12 years By assuming a 50% total individual tax rate, 50% of the costs for restoring or maintaining of a monument end up in tax savings within 12 years (or lower if lower tax rate). Condition: (tax) owner must spend the money A tax advantage (depreciation of 9% for 10 years) will be granted, if the taxpayer does not rent out but live himself in the monument!!! Direct cash subsidy Very few direct cash subsidies (payments) can be received by private owners. Instead public owners like states and cities (as they cannot use tax advantages) can receive high direct cash subsidies from state, federation and EU, if they restore a monument. 2

3 How to combine both? 3

4 Solution: Keep private ownership (civil ownership) with the public sector (municipality, city, state etc.) and transfer the tax ownership to a private investor. How can this be achieved? Leasing of a monument from the public sector (instead of buying) German tax law provides with regard to real estate leasing the following conditions: If leasing conditions represent a transfer of economic ownership rather than an operate leasing, the tax ownership will be seen on the side of the lessee. German tax administrative orders assume this if - the duration of a leasing contract is longer than the useful life time of an object or - the total leasing rates before the first possible dissolution of the contract cover more than the full amortization of the object In Germany this case is seen as: verunglücktes Leasing (leasing by accident) 4

5 Tax consequenses of leasing by accident - Current leasing payments themselves are not tax deductible. - The lessee has to book on the assets side of his balance sheet the net present value of all payments over the contractual period. On the liabilities side of his balance sheet a debt against the lessor has to be booked in the same amount. - The leasing rates have to be broken down into an interest portion (to be booked in the P/L as costs and tax deductible) and into a redemption portion (to be booked against the debt in the balance sheet). - The capitalised net present expenses on the assets side are basis for the increased depreciations as mentioned before. à Tax deductible: + interest portion of the leasing rates + increasd depreciation amounts!!! 5

6 Application on the case: - Let the public sector stay the owner of a monument in the sense of civil law (do not buy, but lease from the public) - Have a leasing contract which tax-wise shifts the ownership to the lessee, so that he can write off what he pays to the public (in our case leasing contract over 100 years which is beyond the normal useful lifetime of 50 years for a real estate object) - Pay the leasing fees for the next 100 years completely in advance so that the public owner (municipality, city, state etc.) can use this money (plus the high subsidies) to pay for the restoration. - Lessee can write off this onetime payment within 12 years!!! 6

7 SCHAFFER & PARTNER A castle like this could be a prestigious guesthouse for your client! (and be rented out as a Hotel) Photo: Burg Monschau, Eifel, (Steffen Heinz) 7

8 Norbert Mevissen Steuerberater Fachberater für Internationales Steuerrecht Kanzlei Schaffer & Partner GdbR Äußere Sulzbacher Str Nürnberg Tel.: (+49) Fax: (+49) nue@schaffer-partner.de Member of AGN INTERNATIONAL 8