In the current book year (2023) it is possible to benefit from a new temporary scheme, which will make it attractive to invest in assets for your business before the year is over. Normally, arbitrary depreciation can only be done in certain cases. For example, when buying an environmentally friendly asset or if you are a starting self-employed entrepreneur. With the temporary scheme, it is possible to arbitrarily depreciate new business assets that are purchased in 2023. This temporary scheme applies to businesses that pay income tax or corporate tax.
Currently, you are required to depreciate all business assets (i.e. laptops, phones) with a purchase value of over €450 over the course of a five-year period in equal amounts. The temporary scheme allows you to depreciate a chosen amount on an asset.
Note, that arbitrary depreciation will implicate a lower amount to depreciate in the years that follow 2023. This can be disadvantageous if you expect to make a lot of profit in those years. Without the additional depreciation, your depreciation will remain the same every year.
Conditions arbitrary depreciation 2023
You are eligible for the temporary scheme if you meet the following conditions:
- The asset has been purchased or produced in 2023;
- The asset is new and has never been used before;
- The asset will be taken into use before 1 January 2026; and
- The asset is not exempt (see below)
Some assets are not covered by the temporary arbitrary depreciation scheme. These assets do not fall under the new scheme:
- The following means of transportation: ships, aircraft, mopeds, motorcycles, and passenger cars for private transportation (unless they are private cars with no CO2 emissions);
- Intangible assets such as goodwill, licenses, permits, and software;
- Public roads and some objects attached to them, such as bridges and tunnels;
- Business assets that you lease to the same party for an extended time; and
- Assets you already depreciate arbitrarily through another arrangement.
Example of arbitrary depreciation
- The amount you depreciate in total: €100,000 (purchase value) - €10,000 (residual value) = €90,000;
- The amount that you depreciate arbitrarily in 2023: maximum 50% of €90,000 = €45,000; and
- The amount you are legally obliged to depreciate per year: €45,000 (the other 50%) / 5 years of economic life = €9,000 per year.