From Jan 1, 2021: Depreciation on computer hardware and software over 1 year possible
BACKGROUND
  • Computer hardware and software are subject to increasingly rapid change due to rapid technological progress.
  • However, the normal useful life, which is the basis for depreciation in accordance with Section 7 of the German Income Tax Act (EStG), has not been reviewed for these assets for around 20 years and therefore requires adjustment to the changed actual circumstances in accordance with the letter from the German Federal Ministry of Finance (BMF) dated February 26, 2021.
COMPUTER HARDWARE AND SOFTWARE
  • Computer hardware within the meaning of this regulation includes computers, desktop computers, notebook computers, desktop thin clients, workstations, docking stations, external storage and data processing devices (small-scale servers), external power supplies, and peripheral devices.
  • Software as defined in this regulation covers operating and user software for data input and processing. This also includes the non-technical physical application programs of a system for data processing, as well as standard applications and applications tailored to the individual user, such as ERP software, software for merchandise management systems or other application software for company administration or process control.
APPLICATION
  • A useful life of one year can be applied as the basis for the useful life to be applied in accordance with Section 7 (1) of the German Income Tax Act (EStG) for the purchase and production of computer hardware and software from January 1, 2021.
  • The principles can also be applied to corresponding assets that were acquired or manufactured in previous fiscal years and for which a useful life other than one year was used as a basis.
  • For computer hardware and software held as private assets that are used to generate income, this rule will apply accordingly from the 2021 assessment period.

Source: BMF letter dated 26.2.2021

Photo: Gerd Altmann, Pixabay

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