Subsequent production costs for a building

Whether subsequent production costs have been incurred is to be assessed on the basis of the converted partial area, insofar as it can represent an independent asset.

Subsequent production costs can arise for a building both in the case of an extension and in the case of a significant improvement. In this case, the costs are not immediately deductible as income-related expenses or operating expenses, but are depreciated together with the other production or acquisition costs of the building. The criterion for distinguishing between immediately deductible maintenance expenses and production costs is generally the asset to which the construction measure relates.

If only a spatially delimitable partial area is affected by the construction work, which could, however, form an independent asset under suitable circumstances, this partial area is also the standard of assessment for the existence of production costs if it is part of an asset that extends beyond the partial area. This was decided by the Lower Saxony Tax Court in a dispute concerning the conversion of only one of several floors in a building.