Capital cost recovery
Capital cost recovery is the process of a business obtaining tax relief for capital expenditure which is incurred on qualifying assets purchased and used for business purposes.
Many countries offer attractive tax incentives to businesses investing in qualifying plant and machinery and buildings.
The rules and extent of capital cost recovery differ by country, with the amount of investment cost attracting tax relief in a year generally being referred to as a “capital allowance” or “tax depreciation”.
In most jurisdictions, capital investments are not treated like other costs which are deductible from revenue. Typically, separate schedules consider the economic life and determine the number of years over which tax relief is available; they aim to enable a taxpayer to write off the initial capital cost of an asset gradually over time.
In addition to general plant and machinery acquired for business purposes, capital allowances can also be available when a business acquires new property or refurbishes/develops existing property; examples include, but are not limited to, the following:
Capital cost recovery on property expenditure is historically low, with many businesses not benefiting from potentially significant tax savings which could be available.
Identifying tax relief
Identifying the type of expenditure that attracts tax relief for capital cost recovery purposes can be complex and often requires an in-depth knowledge of tax authority practice and the tax legislation in force. In some jurisdictions there is no approved list of qualifying items of plant and machinery; whether an item qualifies for relief often depends on existing case law and a thorough understanding of the legislation in force.
Furthermore, it is vital to ensure that sufficient documentation and evidence are prepared to support any capital cost recovery claim in the event of an audit from tax authorities.
Why choose Kreston Global?
Our team of international experts across the globe have the dedicated technical, surveying, and forensic analysis skills required to maximise claims, regardless of where in the world you do business.
We are highly experienced in maximising the potential tax savings which may be achieved via capital cost recovery, providing comfort that we can handle businesses’ specific needs and challenges in a proactive and supportive way, providing the level of service required in a timely and efficient manner.