Landfill tax – deduction for construction work

The Council for Advance Tax Rulings has determined that tax on waste used for the construction of partitions in fire cells at landfills is deductible.

A company used a certain waste for the construction of partitions in fire cells at the company’s landfill. The waste “fines” were comprised of atomized recycled metal and of gravel, glass, plastic and porcelain waste. The company was denied deduction of the tax on the waste, which the Tax Agency motivated on the basis that the measures undertaken to build the partitions were of the nature of the on-going treatment of waste, instead of comprising a permanent construction in the actual landfill.

The ombudsman at the Tax Agency presented a query to the Council for Advance Tax Rulings as to whether the waste is to be seen to be used in the construction work in the company’s landfills or to be used to achieve an environmentally secure landfill, or whether the measures are to be seen to comprise daily coverage.

The Council for Advance Tax Rulings’ assessment is that the company’s measures in constructing partitions in fire cells is appropriate in preventing fire and in decreasing the risk of the spread of fire, and that the waste in question is appropriate to be used for this purpose. According to the Council’s understanding, the waste is, then, to be seen to be used for construction work or to achieve an environmentally-secure landfill. As the partitions are in place during a longer period of time, the Council does not deem that they comprise dailycoverage. The tax on the waste is, therefore, deductible.

The advance ruling has not been appealed.

Comments

The advance ruling illustrates the fiscal boundaries between deductible construction work and non-deductible dailycoverage. In these cases, environmental permits, construction drawings and other environmental reporting can be significant in assessing the right to deduction. For landfill owners using similar material for the construction of partitions in fire cells, the advance ruling is positive.

Our understanding is that the right of deduction, as the rules are formulated, is based on two alternative grounds; that the waste is used for construction work and that the waste is used to achieve an environmentally secure landfill or storage. However, it is not quite clear from the advance ruling if the Council consider the construction of partitions to be construction work or if the Council consider the waste to be used to achieve an environmentally secure landfill or storage.