Cost segregation procedure for renewable energy projects

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What does it mean?

Cost segregation is a detailed identification of fixed assets based on tax regulations and Polish Fixed Assets Classification as well as determining the initial value of fixed assets including indirect costs.

Why is it worth it?

GoalsBenefits

Depreciation of fixed assets

Higher depreciation rates available.
Real Estate taxPrecisely defined structures to be taxed and their tax base. For an investment located in several communes, tax base is determined for each commune.
Preparing real estate (investment)
for sale
Transparent structure of fixed assets and better results in due diligence ordered by a buyer.
Inventory of propertyProperty review and the possibility of professional marking of fixed assets.
Real Estate clause

In practice, it often turns out that after cost segregation the entity does not meet the definition of a real estate company and the clause does not apply.

Exemplary calculation

Fixed AssetsInitial valueDepreciation rateDepreciationMinimal CIT on Real Estate
BeforeAfterBeforeAfterBeforeAfterBeforeAfter
Wind farm1000 4,50% 45 202
Foundation for the turbine 100 4,50% 4,5 5
Turbine tower 250 4,50% 11,25 0
Turbine nacelle with generating set 250 7% 17,5 0
Blade and hub 200 7% 14 0
HV cables 150 4,50% 6,75 0
GPO 50 10% 5 0
Total10001000  4559207

Benefits

Increasing monthly depreciation write-offs up to 2 times.

Up to 3-fold reduction in Real Estate tax on structures.

When do we apply cost segregation procedure?

  • At the stage of building / putting investments into use.
  • At the investment acquisition stage (Asset deal).
  • While the investment is used by an SPV, including after the share deal – subject to certain conditions.

Why external adviser?

During the investment and the stage of putting the investment into use it is necessary to use external providers, because:
  • accounting department usually does not have enough time;
  • they do not carry out technical investment inspections;
  • they do not combine technical knowledge with practice regarding the possibility of separating fixed assets;
  • they usually do not provide extensive analytics of fixed assets under construction accounts, so they cannot determine the initial value.

Our experience

We settle various types of investments, either as part of the settlement of newly created facilities or correction of settlements for tax savings purposes:
  • wind farms;
  • photovoltaics;
  • shopping malls;
  • office and service complexes;
  • office buildings;
  • hotels;
  • industrial halls;
  • warehouses;
  • underground parking lots.

Contact

Rafal Kran kwadrat
Rafał Kran

Partner | Tax adviser
E: rafal.kran@mddp.pl
T: +48 693 290 919

Lukasz Szatkowski kwadrat
Łukasz Szatkowski

Manager
E: lukasz.szatkowski@mddp.pl
T: +48 570 898 499

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