The company investment tax credit is a teaser for companies to make investments. Investments are good for our economy, hence the tax credit
Company investment tax credit
An investment equals a cost made by the company exceeding the amount of EUR 450 excluding VAT. The cost is related to material, like computer, desk, chair and what have you. Other costs, like those of subcontractors, rent etc. is not regarded an investment.
Software is out of the ordinary. Most companies pay for a software license or subscription. That does not make them owner of the software, only user. That is not an investment.
How does the company investment tax credit work?
The company makes the investment and keeps track of that. If you invest less than EUR 2.400 you have no deduction. Investing more than EUR 2400 but less than EUR 59.939 (2022) you get 28% over the total investment value as deduction.
When you invest over EUR 59.939 but less than EUR 110.998 your deduction is EUR 16.784 instead. That implies you invest EUR 59.940 you get EUR 16.784 deduction or if you invest EUR 110.900 you get EUR 16.784 deduction.
Between EUR 110.999 and EUR 332.994 the EUR 16.784 gradually reduces. Above EUR 332.994 no investment credit is paid.
The company invests in EUR 3.000 excluding VAT. That is more than EUR 2.400 which implies over the full EUR 3.000 28% investment credit is allocated in the corporate/personal income tax return.
However, the investment itself is subject to regular accounting rules. That implies the EUR 3.000 is to be depreciated over a 5 year period.
Which investments are excluded from this discount?
The company car, with the exception of the full electric or liquid hydrogen car. This type of car has more tax facilities, such as the MIA and the random depreciation possibility. Mind the conditions that need to be met.
No investment credit for housing, ground costs, animals, ships, representative made costs, shares/bonds, receivables, goodwill or federal permits.
No investment credit for investments that will be rented for more than 70%, or personal goods transferred to the company. Nor investments made with family.
Company terminats/stops. What happens then?
The company invested in a EUR 3000 laptop in November and in February you decide to close the company. What happens with the investment?
In the year purchasing the laptop, the laptop is processed as normal. However, in February the company is closed and that implies the laptop is to be sold to yourself against the economic value. Moreover, the investment tax credit will be made undone partly via the income or corporate income tax return. The value of this laptop is to be determined within reason. Reasonable is probably not EUR 100 for the laptop. The tax office does make inquiries especially about these aspects during an audit.
Tax is exciting
We think tax is exciting. Assisting you with optimizing your income tax return is our standard. This implies the investments of your company are taken into account. Please connect to us if you like assistance with your 2021 entrepreneurs income tax return or your 2021 corporate income tax return.