The tax depreciation of business assets in the Netherlands

For the levy income tax in the Netherlands, depreciation of tangible and intangible business assets is allowed within certain parameters. 

The law does not prescribe a particular depreciation method, but instead refers to principles of 'sound business practice'.

The general principle of 'sound business practice' is that annual depreciation should properly reflect the decrease in value of assets, considering the acquisition price, the economic life of the asset involved and the residual value of the asset. This means that virtually all generally applied depreciation methods (straight-line method, declining-balance method, etc.) are allowed, provided that they provide for a reasonable outcome (in accordance with sound business practice) and is consistently applied.

Land is generally not depreciable.

For certain particular business assets, the Dutch income tax law provides for maximum depreciation. As such, it is important to deviate between the depreciation terms of the following assets:

• Intangible assets

• Buildings

• Other business assets

Intangible assets

It is noted that a distinction should be made between goodwill and other intangible assets.

Goodwill

According to Dutch tax law, acquired goodwill may be depreciated over 10 years with a maximum of 10% per year. As of 1 January 2007, this limitation has been introduced. However, it is noted that this limitation also applies in case a depreciation has been taken into account prior to 1 January 2007. According to transitional rules, the remaining book value of the goodwill is in the latter case depreciated over a period of at least 10 years.

Other intangible assets

For tax purposes, the other intangible assets will follow the depreciation rules of other business assets. This implies that the maximum annual depreciation is generally set at 20% of the historic cost price. The depreciation may not exceed the aforementioned 20%.

In addition, it is noted that cost of self-produced intangible assets (with the exception of self-produced goodwill, which is not deductible at all) can be depreciated at once.

Buildings

In general the amount of depreciation on buildings is calculated as follows. The acquisition value of (the business part of) the building (= A) reduced by (a proportional share of) the value of the land, which belongs to the building (= G). Furthermore, take account of the residual value of the property (= R) and the useful life (say 50 years). The height of the depreciation per year is A - R - G x 2%.

The depreciation on buildings for tax purposes is however limited; in practice it is solely possible to depreciate on buildings for tax purposes, in case the book value exceeds the so-called minimum tax value. The aforementioned minimum tax book value is based on the Law on Valuation of Immovable Property (in Dutch: 'Wet waardering onroerende zaken'), and in Dutch the minimum tax book value is defined as 'WOZ' value.

Based on the aforementioned rule, it is not possible to depreciate on buildings for tax purposes, in case the book value of the building drops below the so-called minimum tax value (i.e. 'WOZ' value).

In addition to the above, it is noted that no depreciation take place on land.

If more clarity is required in your situation, please do not hesitate to contact us.

Other business assets

As indicated, the maximum annual depreciation is generally set at 20% of the historic cost price. The depreciation may not exceed the aforementioned 20%.

In addition, assets with a relatively low value (2019: less than € 450) can be depreciated at once in the year of acquisition.

Furthermore, it may be possible - under certain conditions - to apply for an accelerated depreciation. As such, it is possible to apply an accelerated depreciation for assets which are important for environmental protection (appointed by the government). Furthermore, special rules may apply for starting entrepreneurs, ships, etc.

If you want to check whether you apply the right depreciation term for your assets for tax purposes, or have questions regarding the above, please do not hesitate to contact us via e-mail or call us at our offices in Amsterdam at + 31 20 5709440 or in Rotterdam + 31 10 2010466