Operations following acquisition
The real estate asset is taken onto the purchaser’s balance sheet.
The choices made by the purchaser in terms of how this process is undertaken will have a significant impact on the asset’s future profitability and the tax arrangements applicable to it.
- How the price is split between land costs and construction costs (see hyperlink: Rentals > Profits tax > Main deductible charges > Write-down)
- How the construction costs are split between their various component items for the purpose of determining annual depreciation (see hyperlink: Rentals > Profits tax > Main deductible charges > Depreciation)
- Options applicable for the purpose of splitting the accounting and tax treatment of the purchase costs between charges and incorporation of the real estate asset’s cost price (see hyperlink: Rentals > Profits tax > Main deductible charges > Acquisition costs )
- Any rental guarantees granted by the vendor (see hyperlink Rentals > VAT and CRL > Focus - The issue of rental guarantees)
As far as VAT is concerned, the purchaser will have to:
- opt if appropriate to charge VAT on the rents (if the operation involves a bare real estate asset rented out for business use and the choice made is to charge VAT on the rents);
- ensure, if Article 257 bis of the FTC applies, that the information relating to the vendor’s obligations to settle VAT are passed on to the purchaser.