Acquisition cost forms the basis for calculating depreciation and amortisation. It is defined in section 255(1) HGB as follows:´
“Acquisition cost is the expenses paid to acquire an asset and to bring it to an operational state, and that can be individually assigned to the asset. Acquisition cost also includes additional and subsequent costs of acquisition.
Reductions of acquisition cost must be deducted.”1
In a property acquisition, the acquisition cost is the purchase price less the relevant land value. The latter is defined by the fair value, which is derived from the indicative land value. In addition to the purchase price for the building, additional acquisition costs (notary and court fees, brokerage commission, costs of due diligence, property transfer tax, etc.) are also taken into account in acquisition cost.2 These are divided into the share attributable to the land value and the share attributable to the value of the building. The latter is included in the assessment basis for depreciation.
Financing costs and the charges incurred for the notary and the land register are not included in the acquisition cost, and are instead taxed as income-related expenses.3
If, after the acquisition of a property, more than 15% of the value of the building has to be invested in its maintenance within three years, these investments are subsequent acquisition costs and must be taken into account in the building’s depreciation in line with the rates of depreciation. If this threshold is not exceeded, these costs can be deducted as income-related expenses. This is determined by the invoice amounts not including VAT. Recurring annual measures are not included.4
Regarding the question of the immediate deductibility of the maintenance expense or its capitalisation, the relevant factor is whether the expense serves to bring the property to an “operational state” in accordance with section 255 HGB. This is particularly the case for buildings that are not in use at the time of acquisition. If the property is in use at the time of acquisition, it is assumed that it is in an operational state. However, repairs and modernisation work are considered subsequent acquisition costs if they represent a substantial improvement of the building as a whole and are implemented within the above period and amount.
Furthermore, expenses to eliminate hidden defects can be considered acquisition or productions costs as defined by section 255 HGB if they increase the value in use of the building.5