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This is the 200th blog that I have published since I started in June 2012. And as I missed celebrating the 100th blog, I am doubling my celebrations. This is a good excuse, because recently we successfully defended before the Federal Administrative Court (A-5099/2055 dated 20 January 2016) our client’s standpoint that demolition costs entitle to input tax deduction.
Specifically the issue was whether the input tax deduction is permissible on demolition costs, if the property was used for taxable purposes (option leased) and the owner later realises on part of the plot a residential building. The Federal Tax Administration (FTA) wanted to rely on the future use and to refuse the input tax deduction (see also the blog dated 20 April 2015). We took the view that the demolition of the building ended the former taxable use and the input tax deduction therefore must be permissible. The Court in effect agreed with us and allowed the input tax deduction. However it argued that between the demolition of the factory and the buildings being constructed there is only a loose connection. The supplies and services drawn for the demolition of the factory were from a VAT aspect not in temporal or factual (or spatial) proximity to the new buildings and therefore the input tax deduction is given in full.