What is an investment credit?
Investment loan is a tax loan that the company can use to settle some capital expenditure carried out in the project. This credit is used as a motivation to encourage companies to spend money in advance for investments that may not be paid immediately. In most cases, business must generate profits to remain viable, and if it does not have a clear profit that is achievable in a relatively short period of time, the company may not feel that the investment is worth it. Investment loan helps to pay the investment faster. This is known as capital expenditure. Usually received accounting rules allow the company to depreciate the value of this capital equipment for a certain period of time. Even with the use of a depreciation loan available according to most tax laws, some businesses can refrain from risking by investing dollars for investment project.
To stimulate the development of certain industrialthe sector or to create new business opportunities in a given industry or area, a managing tax authority will sometimes allow to deduct another loan, thereby reducing the tax liability and increasing its profits. Examples of investment loan can be found in incentives that some governments offer to develop clean energy, such as solar and wind projects, and for the development of alternative fuel vehicles. Normally, the company would not have motivation for large investments in these types of new technologies, as a profitable window, a period in which the company can reasonably expect to generate investment profits, is too small. However, with an additional investment loan incentive, the company is more likely to invest capital costs for such technologies.
Some critics of this model of support for new business development complain that these types of investment credits benefit only the largest investors who have capital reserves to invest. Although it could be the case of new techNologue, most economists agree that credits usually work, because many new technologies would simply not exist if they were not introduced investment credits to postpone costs for companies. These types of tax obligations of reducing devices associated with accelerated depreciation plans often help stimulate the development in new areas of technologies and also create new businesses and industries in areas that would not normally be profitable.