Justyna Bauta-Szostak, MDDP about tax savings during hotel construction and amortisation

"By counting the hotel’s fixed assets, equipment, IT hardware, electricity, electronics, it is possible that the depreciation could be as much as five times greater than when we enter the hotel in the books as one building," said Justyna Bauta-Szostak, of MDDP.
"When it is investment of PLN 100 mln, this difference is immense. If the building is entered in the books as one building, the depreciation totals PLN 12.5 mln, and when the fixed assets are accordingly divided, the depreciation can even reach PLN 50 mln within five years," explained Beata Bauta-Szostak.

"When an investor decides to calculate the amortisation as one scheme, it is not possible to change this later. This means that it is not possible to start calculating the amortisation by entering the building in the books as a whole and then the next year to change this and work out the amortisation of every single part of the building, such as the elevators, technical appliances and other elements. The amortisation process has to be continued throughout the entire time the building is used. So in the case of investment settlements, it is important to settle this before the building is added to the books," said partner of MDDP.

She added that the best way would be to talk to a tax advisor before the investment starts, or, at the latest, when the construction work is taking place. Of course, later on it is also possible to do something and search for tax savings, but faced with plans to implement a tax avoidance clause, it is better and safer to establish the tax scheme properly from the outset than to make changes later. As there is always the opportunity for asking such questions as: why such an reorganisation is being done, is there a business or only a tax reason for doing this? If everything is done properly from the beginning, it is hard for the tax authorities to dig into the tax scheme of an investment.