What are other investments than FD

Investment allowance improvements

Investment deductions enable depreciation potential to be shifted forward to a financial year prior to the acquisition or manufacture of certain assets. With the resulting
Tax deferral allows companies to save the funds necessary to finance the investment more easily. In addition, special depreciations are possible for the acquisition or manufacture of favored assets in order to bring forward further depreciation potential.

An essential element of the Annual Tax Act 2020, which the federal government and parliaments are currently working on, is a mini-reform of the investment deduction amount, which reduces various eligibility requirements for companies and increases the maximum deduction amount somewhat. At the same time, two tax arrangements with deductions are legally excluded, at least one of which has so far been used to offset additional results after a tax audit.

Most of the changes, in particular the improvements for the companies, should already apply to financial years ending after December 31, 2019, and can therefore be as early as 2020 in
Can be claimed. Only one year later, i.e. from 2021, will the two changes that are intended to legally exclude the unwanted tax arrangements take effect. The following changes are planned:

  • Investment costs: The subsidized investment costs will be increased from 40 to 50%. In this way, higher limits for the immediate depreciation of low-value assets can be implemented indirectly, because only the acquisition or production costs reduced by the investment deduction are to be used for checking the limit. Previously, assets up to a value of EUR 1,333 could be written off immediately with the deduction amount and up to EUR 1,666 could be included in the collective item regulation. By increasing the subsidized investment costs to 50%, assets with a value of up to twice the limit amount can effectively be included in the immediate or compound item depreciation from 2021. For this purpose, an investment deduction amount of 50% of the acquisition or production costs will be claimed in 2020, which can then be used to reduce the actual costs to be applied for the acquisition or production in 2021 by half.

  • Operational use: So far, only those assets have been favored if they are used exclusively or almost exclusively, i.e. at least 90%, in the company in the year of the investment and in the following year. Because of this operational relevance, harmful non-operational use is present not only in the case of private use, but also in the case of free use in another company of the entrepreneur. In order to make the usage options for subsidized assets more flexible, rented assets will also be subsidized in the future, regardless of the duration of the respective rental. In contrast to the previous regulation, longer-term rentals for more than three months are harmless. This also applies if the entrepreneur rents out the asset to another company of his own. In the draft bill, an additional benefit for external use of up to 50% instead of the previous only 10% was provided. This part of the change has been deleted from the law, at least for the time being.

  • Profit limit: So far, different company size characteristics have applied to the individual types of income, which may not be exceeded for the investment deduction amount. For accounting companies, this is business assets of a maximum of 235,000 euros, for agricultural and forestry operations an economic value or equivalent economic value of a maximum of 125,000 euros and for companies with an income statement, a profit of a maximum of 100,000 euros. Because the financial authorities are convinced that the previous size characteristics are partially unsuitable for the delimitation of beneficiary companies, especially in the field of agriculture and forestry, a uniform profit limit of 150,000 euros is to apply in future for all types of income as a prerequisite for the use of investment deductions. This significantly expands the group of beneficiaries, while some large companies will no longer be covered by the preferential treatment scheme in the future.

  • Subsequent assertion: Subsequent application for an investment deduction is possible, provided that the corresponding tax assessment can still be changed, for example with a reservation for the review. This option is often used after tax audits to compensate for any additional results found during the audit by subsequently claiming a deduction. Because this use is not in the interests of the tax authorities, from 2021 the use of deductions for investments that have already been acquired or made at the time of assertion will be excluded. The change only affects investment deductions applied for subsequently, which are used for the initial tax assessment or separate assessment after the objection period has expired. Withdrawal amounts asserted up to the end of the objection period for the initial tax assessment can continue to be used for assets regardless of their time of investment.

  • Partnerships: The Federal Fiscal Court had decided that a favorable investment also exists if the investment deduction was deducted from the total hand-held profit of a partnership and the planned investment is later made by a partner and capitalized in his special business assets. Based on this ruling, taxpayers who do not invest at all can also benefit from the perk. Therefore, from 2021 it will be clarified that the addition of investment deductions is only permitted in the asset area in which the deduction was made. If, for example, a deduction has been made in the special business assets of a partner, the deduction amount can only be used for investments by this partner in his special business assets.