In recent years, some companies engaged in property development have chosen to temporarily assign certain property to rent assets, while not find a buyer, to get some return on the investments made.
Therefore, these companies have changed the accounting classification of these assets in stocks or investment property, plant and equipment and therefore when they managed to sell these assets have been credited the tax credit for reinvestment of extraordinary profits (if reinvested the sale price obtained) in order that the profits from its sale are taxed at 18% instead of 30%.
One of the requirements of this deduction is that the assets are transferred must have been in the property, investment property or intangible, have been allocated to an economic activity and have been in operation at least one year within the preceding three transmission.
Well, this accreditation deduction is being seriously challenged by the tax inspection and by the courts, so the promoter companies should take special care to ensure that this deduction proves applicable to them. The arguments used by the Tax Inspectorate and the courts to deny the applicability of this deduction, are:
- The purpose of the deduction. They believe that the purpose of the deduction is to encourage companies renewing their productive business assets; fact is not satisfied that these operations given the weak links of the assets transferred to the production process of the company.
- The active involvement of the business of leasing property. They believe that no leasing activity beyond the occasional holiday, temporarily scarce and economically irrelevant part of the property as they prepare for sale.
- The actual destination of the asset. They believe that the will of these companies is the sale of real estate assets, the lease being a transient destination.
- The accounting qualification. They consider that the classification of tangible assets or investment property does not depend on more or less time they have been in the equity of the company, but the true destination in relation to their participation in the production process. Therefore, consider the transferred assets must be classified as inventory not being linked to the company permanently.
- The accounting performed. Consider the fact that an asset is accounted for in one way or another does not change the nature of things, it is not the accounting that determines the substantive treatment of a transaction. Therefore, although these assets appearing on accounting as plant and equipment or investment property does not automatically allow these companies to be accredited this deduction.
In conclusion, all taxpayers who find themselves in this situation should seek to strengthen those requirements that allow you to establish the best possible rating of these assets as plant and equipment or investment property.