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Written by:
Bas Hollenberg


Policy decision on application of investment allowance

The State Secretary for Finance recently updated a decision comprising investment allowance viewpoints. The newly revised decision, whose previous version dated back to 2009, has eased the policy pertaining to environmentally friendly vehicles, operating assets not yet featured in the energy or environmental list, the replacement of asbestos containing roofing and incidents involving a tardy choice in favour of investment allowance.

An operating asset is required not to have been used before in order for it to qualify for EIA (energy investment allowance) or MIA (environmental investment allowance). This precludes the use of environmentally friendly vehicles having previously been deployed as demonstration models in a MIA or VAMIL (random depreciation of environmental investments) context. Approval has been granted for the principles of the value-added tax regime being adhered to where it concerns environmentally friendly vehicles that are featured in the environmental list. A vehicle will thus be regarded as new for the first six months of the date as at which it was first taken into use, or for the first 6,000 kilometres it has covered.

Investment allowance is available in connection with the production costs of operating assets not yet having made the energy or environmental list provided certain conditions are met, the essence being that it should involve the in-house development of an operating asset for subsequent inclusion in the list.

The replacement of asbestos containing roofing will qualify in its entirety as an investment provided particular conditions are met. No breakdown needs to be provided into maintenance and improvement. The total expense may be presented as an investment, resulting in MIA entitlement being joined by KIA (small-scale investment allowance) entitlement, albeit that it is required that the entire replacement of the roofing should be accounted for as an investment in terms of profit determination. It is not permissible to charge the maintenance component to the profit in one fell swoop.

Applicants occasionally omit making a choice in their tax return between small-scale, energy and environmental investment allowance even though they have satisfied the full set of KIA, EIA or MIA conditions. The recent easing of the existing EIA-MIA scheme has resulted in the scheme being streamlined and expanded to include KIA.

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