Tax implications of the reduction in the useful life
The average useful life of assets constitutes the basis for linear tax depreciation (in German: Absetzung für Abnutzung, AfA). According to the official German tax depreciation tables, computer hardware and software could only be depreciated or amortised over three years.
With a view to stimulating the economy and boosting digitalisation, the BMF, in its circular from 26.2.2021, opened up the possibility of recognising a useful life of just one year for computer hardware and software. Accordingly, in the context of an instant asset write-off, the full amount of the purchase costs of such assets may already be deducted in the year of acquisition as business expenses or as work-related costs.
Please note: The reduction in the useful life is an option. Depreciation or amortisation over a period of three years is still possible.
Assets covered by this option
The BMF circular includes a detailed list of assets that are covered by the terms ‘computer hardware’ and ‘software’. ‘Computer hardware’ also includes, in particular, peripheral devices, here primarily devices that are used for the input and output of data (such as, e.g., printers and screens).
Please note: Up to now, instantly writing off peripheral devices as low-value assets had been rejected as they could not be used on a standalone basis. The criterion of use on a standalone basis now no longer has to be met.
Cash register systems may also be included in the change to the useful. What matters here is that the cash register has to be computer-based (non-electronic cash registers are not covered by the option).
The term ‘software’ covers operating and user software for data input and processing. This includes, besides standard applications, also software that has been customised for users, such as, ERP software, software for merchandise management systems or other application software for business administration or process control.
Temporal scope of application
Instant asset write-off will be used for the first time for financial years ending after 31.12.2020. A full write-off will also be possible in 2021 for the residual book values of assets that were purchased in earlier financial years. As of the 2021 assessment period, the same will apply to assets held as private assets that are used to generate income.