Previously, expenditure to acquire residential property was counted as living expenses, regardless of whether a piece of land was purchased and built upon, whether a new, turn-key property was acquired or whether one in need of refurbishment was bought. In all cases, the purchase price had to be financed from taxed income and the costs were never tax deductible. This is where the new rules come into play as part of a new energy policy called Energy Strategy 2050.
Specifically, the new law will incentivize energy-efficient construction by providing appropriate allowances. Not only will energy-saving investments be tax deductible, so will costs that arise from razing an older building and replacing it with a new one. It will be possible to split expenditure between up to three consecutive tax periods, provided this spending was not already fully deducted for taxation purposes in the year in which it arose. Under the existing rules, only investments were eligible for tax relief (not the costs of razing) and only in one taxation period. Since such investments often exceed annual income, some of the theoretical tax savings were lost.
But under the new law, it is perfectly conceivable that no taxes need to be paid for three years because taxable income is equivalent to zero. In addition, the timing of the investment and construction work does not need to be so exact to obtain maximum tax relief.