Cost segregation in the RES industry - MDDP - doradztwo podatkowe, finansowe i prawne

Cost segregation procedure for renewable energy projects

Why is it worth it?

Goals	Benefits
Depreciation of fixed assets	Higher depreciation rates available.
Real Estate tax	Precisely defined structures to be taxed and their tax base. For an investment located in several communes, tax base is determined for each commune.
Preparing real estate (investment) for sale	Transparent structure of fixed assets and better results in due diligence ordered by a buyer.
Inventory of property	Property review and the possibility of professional marking of fixed assets.
Real Estate clause	In practice, it often turns out that after cost segregation the entity does not meet the definition of a real estate company and the clause does not apply.

Exemplary calculation

Fixed Assets	Initial value		Depreciation rate		Depreciation		Minimal CIT on Real Estate
Fixed Assets	Before	After	Before	After	Before	After	Before	After
Wind farm	1000		4,50%		45		20	2
Foundation for the turbine		100		4,50%		4,5		5
Turbine tower		250		4,50%		11,25		0
Turbine nacelle with generating set		250		7%		17,5		0
Blade and hub		200		7%		14		0
HV cables		150		4,50%		6,75		0
GPO		50		10%		5		0
Total	1000	1000			45	59	20	7

Benefits

Increasing monthly depreciation write-offs up to 2 times.

Up to 3-fold reduction in Real Estate tax on structures.

When do we apply cost segregation procedure?

At the stage of building / putting investments into use.
At the investment acquisition stage (Asset deal).
While the investment is used by an SPV, including after the share deal – subject to certain conditions.

Why external adviser?

During the investment and the stage of putting the investment into use it is necessary to use external providers, because:

accounting department usually does not have enough time;
they do not carry out technical investment inspections;
they do not combine technical knowledge with practice regarding the possibility of separating fixed assets;
they usually do not provide extensive analytics of fixed assets under construction accounts, so they cannot determine the initial value.

Our experience

We settle various types of investments, either as part of the settlement of newly created facilities or correction of settlements for tax savings purposes: