02/2019: RIGHT MOMENT TO INVEST?

Are you planning to make certain investments in your company in the short or medium term? Then it might be interesting to bring these investments forward to 2019. Below, we briefly set out a few reasons for possibly making these investments in 2019.

The corporate tax rate dropped from 33.99% to 29.58% as of 1 January 2018 and will drop again to 25% on 1 January 2020. Moreover, SMEs will be able to enjoy a reduced rate of 20% on the first 100,000 EUR tranche as of 1 January 2020, provided certain conditions are met.

By investing in 2019 one can, in certain cases, save on taxes by assuming the costs at a higher rate.

In addition, the one-off investment deduction has been temporarily increased from 8% to 20% for investments made by SMEs and sole proprietors between 1 January 2018 and 31 December 2019. SMEs can therefore deduct 20% of the acquisition value from their tax base in the year the purchase is made. If the tax base is too small to deduct the 20%, the remaining amount can be carried over to the following year.

Good to know: an investment in a new build that is let to another SME can, under certain conditions, also benefit from an investment deduction.

Furthermore, as of 1 January 2020 the degressive depreciation system will end and SMEs will be obliged to write off assets pro rata temporis. If, therefore, you invest in 2019 you can bring forward tax savings resulting from this tax deduction by applying the degressive depreciation method. By applying degressive depreciation a larger part of the investment will be deductible at the present tax rate and a smaller part at the future lower rates.

Important: the degressive depreciation percentage is set per group of fixed assets of a similar nature. For those assets to which you have already applied linear depreciation, you cannot switch in the middle of the depreciation period to degressive depreciation.

  • Tip 1: apply degressive depreciation to a new investment in 2019, which shifts the returns to a fiscal year with a lower tax rate;
  • Tip 2: it is better to invest in December 2019 than in January 2020; then you can count the whole first depreciation annuity as an expense in 2019.

In some cases, the elements above can bring a substantial advantage (e.g. investment deduction of 20% on a building with an investment value of 1 million EUR). In other cases, the benefits are rather limited – but every little helps!

If you have any other questions, please do not hesitate to contact us.

 

Aleksandr Natanelov

About Aleksandr Natanelov

Aleksandr Natanelov is Partner Tax & Legal bij BOFIDI Advisory.