#BUSINESSTAX
Investment deduction (investeringsaftrek or also kleinschaligheidsin-vesteringsaftrek — KIA)
If your BV/ZZP acquired or produced fixed assets in 2023 for a total/individual cost of at least € 2 600/€ 450, you may consider to apply an investment deduction (KIA) of up to € 17 841 (€ 19 555 in 2024), which, in addition to normal depreciation, reduces the taxable income of your BV/ZZP.
What are "fixed assets" (bedrijfsmiddel) and depreciation (afschrijving)?
Fixed assets (bedrijfsmiddel)
These are (in-)tangible assets that are used by BV/ZZP in the production of goods, the provision of services, or for administrative purposes (for example, an office, a laptop, equipment). Fixed assets are placed on the balance sheet at the purchase/production price and related acquisition costs (think of transportation, installation, setup, etc.). Expenses for maintenance / improvement of such assets can increase their balance sheet value (be "capitalized"). Think of the costs of software development.
Example. You can allocate the costs of your website design and maintenance to “fixed assets” if the website directly attributes to the sales (for example, an online store). In other words, it is not enough if the site is simply used for the purpose of promoting goods or services.
Depreciation (afschrijving)
The balance sheet value of fixed assets is reduced annually in proportion to the depreciation formula (for example, 20% annually). BV/ZZP deducts the amount of the reduction from the tax base for the relevant tax period. Thus, the cost of fixed assets (€ 450+) cannot be deducted from the tax base by 100% in the year of acquisition/production - such assets must be capitalized and depreciated (partially written off). We will talk about accelerated depreciation - a one-time write-off of up to 75% (willekeurige afschrijving) in one of the following posts.
Are all fixed assets eligible for the deduction?
KIA allows for an additional deduction of up to € 17 841 (2023)/€ 19 555 (2024) in the year of acquisition of the asset/placing the produced asset on the balance sheet.
Examples of fixed assets to which KIA does not apply:
- land,
- residential homes,
- yachts for representative purposes,
- transactions with related parties,
- securities and debt obligations,
- goodwill.
Licenses (for example, annual subscriptions) are also not eligible for investment deduction, as they are not fixed assets due to the periodicity of payments.
How to calculate the size of the deduction?
What to watch out for after using the KIA investment deduction?
It is important to remember that if an asset is sold (for at least
€ 2 600) within 5 years from the start of the calendar year in which the investment was made, then in the year of alienation, it is necessary to "return the benefit", i.e. to add to the tax base the amount calculated as the sale price of the asset multiplied by the percentage used when the deduction was initially applied (desinvesteringsbetaling). The amount of the income added back cannot exceed the amount of the initial deduction.
€ 2 600) within 5 years from the start of the calendar year in which the investment was made, then in the year of alienation, it is necessary to "return the benefit", i.e. to add to the tax base the amount calculated as the sale price of the asset multiplied by the percentage used when the deduction was initially applied (desinvesteringsbetaling). The amount of the income added back cannot exceed the amount of the initial deduction.
Similarly, the taxable income is added back added if:
- the asset no longer qualifies for the KIA deduction due to a change in the nature/mode of its use;
- at the time of the investment, less than 25% of its full cost was paid, and the asset was not put into operation within 12 months after that;
- the asset was not put into operation within 3 years of the investment.
What other deductions can be applied to an asset for which KIA is used?
KIA can be used simultaneously with either EIA or MIA. Therefore, it will not be possible to apply three deductions at the same time. We will talk more about the EIA and MIA deductions in the following posts.
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