Depreciation for wear
If an asset of fixed assets to earn income used that cause cost or production cost of the asset no outflow of the taxpayer. The acquired asset only takes the place of the cash on hand or the bank balance with which the new asset was acquired or produced. This substitution occurs both in the generation of profit income and in the generation of excess income .
If the acquired or manufactured fixed asset is a depreciable asset, it is not the acquisition or production, but the wear and tear of the asset that is a reduction in the taxpayer's assets caused by the generation of income, since the depreciation of the taxpayer's assets no equivalent equivalent is encountered. Such wear and tear are basically business expenses or business expenses . The part of the costs can be "deducted" each year, which results from a distribution over the probable useful life as an annual amount.
The deduction for wear and tear is regulated in Germany in the Income Tax Act, which uses this term synonymously with the business term depreciation . However, while in business terms every decrease in value is called depreciation, tax law distinguishes between the following variants:
- the scheduled depreciation under commercial law is called the depreciation for wear and tear
- The unscheduled commercial depreciation on fixed assets corresponds to the tax deduction for extraordinary wear and tear (AfaA)
- the unscheduled commercial depreciation on current assets corresponds to the partial value depreciation for tax purposes
- collective depreciation according to (2a) EStG (since 2008).
Types of deposition for wear
The deduction for wear and tear is based on two factors:
The deduction is to be determined from these variables according to the following legally possible variants:
Depreciation in equal annual amounts (straight-line depreciation)
The basic rule provides for the deduction in constant high annual amounts (linear depreciation). The acquisition costs of the asset to be depreciated are divided equally over the years of the useful life. This means that the same amount is written off every year. A distinction must be made between the depreciation rate (annual depreciation percentage , which results from the invoice 100 percent / years of use ) and the depreciation amount (acquisition value / useful life) , whereby the useful life is prescribed by law.
With straight-line depreciation, the asset has a calculated residual value of 0 euros or 0 currency unit (WE) at the end of its useful life . The asset would be completely written off while the item still exists in the company. Since this violates the principles of proper bookkeeping, a reminder value of 1 WE was introduced, with which the asset could be kept in the books. Later, however, the acquisition costs were included in the system grid . This means that the reminder value is no longer required. As long as the asset is still available, the corresponding acquisition costs are included in the asset history sheet. If the WG ceases to exist, the AHK are shown as an outflow in the asset history sheet. This means that the disposal can be seen even with a book value of 0 CU.
Depreciation in falling annual amounts (declining balance depreciation)
Until 2007 (and again in 2009 and 2010), the only exception permitted under tax law when calculating multi-year deduction amounts was the geometrical-degressive deduction for movable assets , which are kept in a special register.
With the degressive depreciation, a fixed percentage is deducted each year from the book value of the previous year. The percentage must not exceed a specified multiple of the depreciation percentage to be applied for the straight-line depreciation (= 100% ÷ years of use) and a certain percentage.
Over the past decade, the maximum rates for depreciation have been changed several times by the legislator.
Purchases made before January 1, 2001 were deductible at three times the straight-line depreciation rate or a maximum of 30 percent ((21a)).
From January 1, 2001 to December 31, 2005 the percentage was limited to 20% or twice the straight-line depreciation ((21a)).
An additional exception was the depreciation of rental residential buildings; Here there was the possibility of declining balance depreciation if the building application was submitted before January 1, 2006 in manufacturing cases or if the notarial contract had been concluded legally effective before January 1, 2006 in acquisition cases. For new cases from January 1, 2006 according to(4) sentence 1 no. 2a EStG only considers the straight-line building depreciation of the acquisition or production costs (currently 2%).
As an economic policy measure, the legislature has allowed a declining balance depreciation with three times the straight-line rate and the upper limit of 30% as a special depreciation for purchases in the period from January 1, 2006 to December 31, 2007 ( (2) sentence 3).
On January 1, 2008, the degressive depreciation was abolished as part of the Corporate Tax Reform Act for newly acquired goods ( (2), (21a) EStG). The time of delivery is decisive: If this was before January 1, 2008, the declining balance can still be used in accordance with the depreciation principles.
With the “Act for the Implementation of Tax Regulations of the Package of Measures 'Safeguarding Employment by Strengthening Growth' ” of December 21, 2008 ( Federal Law Gazette I, p. 2896 ), the declining balance depreciation was temporarily reintroduced for movable assets acquired in 2009 and 2010 or have been manufactured. The depreciation rate for these assets is 2.5 times the percentage of the straight-line depreciation, but no more than 25% ( (2) sentence 1 EStG).
As of 2011
Since January 1, 2011, the legal situation of 2008 has been in effect again - the declining balance depreciation has thus been abolished for all new goods and has expired since then ((2) sentence 1 EStG).
Depreciation special forms
With a normal useful life of one to ten years and the maximum rate of degressive depreciation of 30% possible for investments between January 1, 2006 and December 31, 2007, it can be seen that for assets with a relatively short useful life - up to 5 years - the degressive depreciation hardly offers any advantages over the linear depreciation. On the other hand, it has a considerably more favorable effect with a longer period of use.
With this method, the flat share is not fully depreciated at the end of its planned useful life. To get around this, tax and commercial law allows you to switch from geometric-degressive depreciation to straight-line depreciation. This is the only permitted change in depreciation. Switching from the declining balance to the straight-line depreciation is recommended when the declining balance depreciation is lower than the straight-line depreciation taking into account the remaining useful life and the residual value. For goods with a depreciation period of 10 years, this is usually the case after half the total useful life according to the depreciation table (rule of thumb).
Intangible assets may not be depreciated using a geometric degressive method. Depreciation is only made on a straight-line basis or as an extraordinary depreciation.
Low-value assets (GWG) in Germany can be written off in full in accordance with (2) of the Income Tax Act up to EUR 800 (excluding sales tax ) (EUR 410 from 2007 to 2017) in the year of acquisition . LWG acquired in 2008 or 2009 can be placed in a collective item from 150 euros (net without sales tax) and depreciated on a straight-line basis over 5 years with 20 percent.
Beginning and end of the depreciation
According to the German Income Tax Act, the calendar month of the purchase or manufacture must be written off ( (1) sentence 4 EStG). For each commenced month, 1/12 of the annual depreciation is to be set (e.g. if purchased on September 20, 4/12: Sep / Oct / Nov / Dec). The end of the depreciation period results from the depreciation table in which the financial administration specifies the useful life. If the asset is withdrawn prematurely, for example through sale, and within a financial year, the depreciation in the year of the sale is to be applied pro rata temporis (R 7.4 para. 8 EStR).
Depreciation for used assets
In principle, used goods are to be written off over their remaining useful life. If the acquisition costs of an independently usable asset do not exceed € 800 (up to 2017: € 410), they can also be treated as a low-value asset .
An extensive case law has formed in the field of used motor vehicles :
The remaining useful life is to be estimated for these. The age, condition and type of likely use of the vehicle must be taken into account ( BMF letter of May 28, 1993, BStBl. 1993 I p. 483 item 2). For vehicles up to 3 years old, the “normal” remaining useful life can be assumed (6 years according to the depreciation table - vehicle age). Even if the vehicle is more than six years old, a remaining useful life of two to three years will be assumed without special proof of a high mileage.
Conversely, you can also write off longer. According to a BFH ruling of April 17, 2001 (BFH / NV 2001 p. 1255), taking into account the mileage, the previous owner can have a total useful life of more than 8 years. The total number of kilometers traveled by a motor vehicle was determined to be 160,000 km (BFH judgment of July 26, 1991 (VI R 82/89) BStBl. 1992 II p. 1000).
Example of linear depreciation
In January 2005, the independent software developer St. bought a new computer system for his company. The acquisition costs are € 2,700 excluding VAT . The useful life of the computer system is three years, which results in the depreciation rate of 33 1/3%. The annual amount of the depreciation is accordingly 900 €.
St. can make the following deduction for wear and tear:
Anschaffungskosten: 2.700 € AfA im Jahr 2005: 900 € = 33 1/3 % von 2.700 € Restwert am 31. Dezember 2005: 1.800 € AfA im Jahr 2006: 900 € = 33 1/3 % von 2.700 € Restwert am 31. Dezember 2006: 900 € AfA im Jahr 2007: 899 € = 33 1/3 % von 2.700 € Restwert am 31. Dezember 2007: 1 € (Erinnerungswert)
If St. only buys the computer system in October 2005, the development looks like this:
Anschaffungskosten: 2.700 € AfA im Jahr 2005 3/12 von 900: 225 € = AfA nur für 3 Monate Restwert am 31. Dezember 2005: 2.475 € AfA im Jahr 2006: 900 € Restwert am 31. Dezember 2006: 1.575 € AfA im Jahr 2007: 900 € Restwert am 31. Dezember 2007: 675 € AfA im Jahr 2008: 674 € Restwert am 31. Dezember 2008: 1 € (Erinnerungswert)
Example of declining balance depreciation
In January 2009, the entrepreneur St. bought a desk for his office for a cost of € 1,800. The useful life is 10 years, which results in a depreciation rate of 10%. In this case, St. uses declining balance depreciation. With declining balance depreciation, the depreciation rate is applied to the residual value. In this case, the depreciation rate may be 2 1/2 times as high as with straight-line depreciation (see above), but not higher than 25%. Declining balance depreciation is no longer permitted for assets purchased after December 31, 2010.
Anschaffungskosten: 1.800,00 € AfA im Jahr 2009: 450,00 € = 25 % von 1.800,00 € Restwert am 31. Dezember 2009: 1.350,00 € AfA im Jahr 2010: 337,50 € = 25 % von 1.350,00 € Restwert am 31. Dezember 2010: 1.012,50 € AfA im Jahr 2011: 253,13 € = 25 % von 1.012,50 € Restwert am 31. Dezember 2011: 759,37 € AfA im Jahr 2012: 189,84 € = 25 % von 759,37 € Restwert am 31. Dezember 2012: 569,53 € AfA im Jahr 2013: 142,38 € = 25 % von 569,53 € Restwert am 31. Dezember 2013: 427,15 € AfA im Jahr 2014: 106,79 € = 25 % von 427,15 € Restwert am 31. Dezember 2014: 320,36 €
Since the declining balance depreciation can never be fully depreciated, it is permitted to switch to straight-line depreciation and from then on each year write off the same amount of the residual value at the time of the change. Now a change to linear depreciation is appropriate. The amount of depreciation now results from the remaining book value and remaining term:
320,36 € / 4 Jahre = 80,09 € pro Jahr
Other special regulations
- low value asset
- Special depreciation
- Investment deduction
- Partial depreciation
- Graduated depreciation
Regulations of Swiss tax law
In Switzerland, the Swiss Federal Tax Administration (FTA) publishes maximum depreciation rates that must be observed. In the documents that are made available for the specific industries, both the linear and the degressive rates are listed. These depreciation rates apply throughout Switzerland, but the cantons may deviate from these provisions in individual cases.
In internal accounting, cost accounting and controlling , the depreciation, called depreciation, is offset according to the cause. Here, there can be decisive differences to the depreciation prescribed by tax law.
The economic depreciation (ÖA) is the amount necessary to make future replacement investments. The amount is, ceteris paribus , smaller than the commercial or tax depreciation, since the amount is also subject to interest. The OA is calculated by:
OA = Depreciable Assets
In practice, economic depreciation is required, for example, when calculating cash value added .
- Geiermann, Liebscher, Rosarius, Stuhrmann: AfA-Lexikon. With the official depreciation tables from the BMF. Stollfuß Medien, ISBN 978-3-08-254300-9 .