This consists of the price, purchase costs, and installation costs. In addition, discounts are included.
Investments: depreciation costs
As an independent entrepreneur, of course, you want to make a profit with your company. But to achieve this, you first have to invest in company assets. Company assets are business expenses that you make in order to run your business. You may deduct many company expenses from your profit. The result? Less tax to pay!
Investments are a special form of business expenses. You may not deduct these in one go, but you have to spread the costs amongst the life value of the asset. On this page, you can read more about the depreciation of investments.
Do you have questions regarding the depreciation costs of your investments? We are happy to help you! Fill in our contact form or call us on + 31 (0) 20 – 2170120.
What are investments?
Not all business expenses are seen as investments. There is a distinction between regular business expenses and investments. The Dutch tax authorities see a company asset as an investment when:
- it has a minimum value of € 450 excluding VAT for entrepreneurs that are subject to VAT (for those that are not, the minimum value is € 450 including VAT);
- the asset lasts longer than one year.
Are depreciation expenses deductible?
Yes, the depreciation (or: amortization) expenses on your investments are deductible. You may deduct “ordinary” business expenses under €450 in one go. But, as we already mentioned, with investments, it works a little differently. Here, you have to deal with depreciation. Depreciation is a decrease in the value of your business asset: you may deduct this depreciation annually. You can easily calculate the depreciation of investments yourself. You need the following information to calculate the yearly depreciation:
This is the value that the asset has after you no longer use it for your business.
Here, you can assume the economic lifespan. This period has expired when it is no longer economically useful for your company. Good to know is that you can depreciate a maximum of 20% per year!
In most cases, the straight-line method is used. This means you can depreciate your investment with a fixed percentage per year. We use the following formula to calculate the straight-line depreciation: (cost of purchase – residual value) / expected duration of use.
In your situation, the purchase of a company car is necessary to keep your company running. The purchase costs amounted to € 20,000. The company car is based on a maximum lifespan of five years, after which it has a residual value of € 5,000. The annual depreciation is as follows:
(20,000 – 5,000) / 5 = 3,000
Do you have the car for the whole year? Then, you may deduct € 3,000 from your profit. Did you buy the vehicle on August 1st? In this year, you can only deduct the months from August. In this case, you may deduct (3,000 / 12 x 5) €1,250 from your profit.
We are happy to help!
Do you have any questions regarding the amortization of investments? Or do you have other tax-related questions related to your own business? We are happy to help you! Feel free to contact us using the details below.