Depreciation and amortisation

Do you invest in assets? Then you must deal with various depreciation and write-down capabilities of which you need to be informed. These opportunities may for tax purposes have an impact on your business. But how can you exploit the opportunities to gain a tax advantage? Mazars will be happy to help you.

If you invest in assets such as machinery, transport equipment, tools, stock, property, goodwill, licences, etc, you cannot deduct the amount invested at one go against the expense of profits, but rather the acquisition costs must be spread over the useful life of the asset. The law states that the acquisition costs of assets are allocated to the year in which the asset is used.

Depreciation rules

To be able to write off an asset, you must determine the amount you can write off annually. For this you need the following information:

  • The purchase costs: purchase price plus any costs of purchase and installation
  • The estimated residual value of the asset. This is the value that the asset is still expected to have when you cannot use it for your business
  • The expected useful life of the asset in your company in whole years

As a taxpayer, you have, in principle, relative freedom in determining the useful life of an asset. However, the following fiscal assumptions must be used in calculating the annual depreciation costs that can be charged to the fiscal profit:

  • For movable goods, you may not exceed 20% depreciation of the purchase price per year
  • Property that is used for the benefit of the company can be depreciated annually for up to 50% of the property value
  • Property that is used as an investment can be depreciated annually for up to 100% of the property value
  • Goodwill can be depreciated annually for up to 10% of the acquisition cost

Devaluation

For purposes of calculating annual earnings in respect of assets, the rule is that they are measured at the acquisition or production cost, less depreciation or lower value. When the value of an asset has demonstrably and significantly decreased compared to the tax base, the asset must be devalued to the so-called lower value. 

Would you like to learn more?

Would you like to know how to apply the potential for write off or write-down in your business? Then talk to Eric Klein Hesseling (partner) by e-mail: eric.kleinhesseling@mazars.nl or by phone": + 31 88 277 23 84. He will be happy to assist you.

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