Random depreciation of investments 2023

05 December 2022

The government has announced to allow random depreciation for new investments for tax year 2023.

A number of additional changes were recently proposed during the discussion of the 2023 tax plan. These changes have yet to be worked out into a bill, which proposal still needs to be approved by the Lower and Upper Houses of Parliament. Part of these additional changes is the reintroduction of random depreciation (referring to the scheme that was temporarily introduced at the time of the credit crisis).

The basic principle is that business assets are depreciated over their lifetime. The annual depreciation is the purchase price minus the residual value divided by the useful life of the asset. For tax purposes, depreciation must take place over at least five years (maximum 20% per tax year). It was recently announced that the possibility of random depreciation will be allowed for investments in new assets in 2023.

Based on what is currently known, a maximum of 50% of the investment may be charged directly to profit in the year of purchase (2023). The remaining 50% must be depreciated in the normal way. The temporary broad depreciation scheme is applicable for both income tax and corporate income tax. The scheme will only apply to designated business assets that have not previously been put into use by the company. So it concerns new investments in 2023.

Not all investments may be depreciated at random. Random depreciation does not apply to the following business assets, among others:

– Intangible assets (such as quotas, goodwill, property rights);
– Aircraft, buildings, (residential) vessels, means of transport (mopeds, motorbikes, passenger cars not intended for professional road transport (unless electric passenger cars);
– Business assets primarily intended for rental to third parties.

The temporary random depreciation scheme will only apply to obligations entered into or production costs incurred in 2023. The moment the offer for the purchase is signed is decisive for determining in which year the investment was made. Consequently, it may therefore be interesting to defer planned investments to 2023. In addition, it may be attractive to possibly bring forward investments for 2024 and make these investments in 2023.