A depreciation? Sounds like a complicated financial concept that gives you a headache? No worries! In this article, we’re going to talk about depreciation using a simple numerical example to get you started.
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Let’s start at the beginning. Depreciation is actually a way of reducing the value of a purchase as time passes. Imagine you buy a brand new bicycle. That bike is worth a lot of money at the time, but after a year it will no longer be brand new. It will have suffered wear and tear and may even have become a bit rusty. We call this loss of value depreciation.<\/strong> The loss of value is the yearly cost to your business. Even if you spent \u20ac10,000 when you purchased the bike, the \u20ac10,000 is not the immediate cost in accounts.<\/strong> Did you know.<\/strong> An investment does not equal an expense. The depreciation on an investment is the cost. If you purchase inventory for your webshop, you don’t<\/strong> have to write<\/strong> it off<\/strong>. After all, you expect to sell it again without reducing the value of your stuff. Moreover, you don’t expect the inventory to stay in your business for a long time. Just like you won’t write off new pens you buy for your office. Even if you expect these to last for a while, they are so cheap that you will enter them as an expense in 1 go. So there is also a minimum amount from when you have to think about entering them as investment. So in general, you will want to write off more expensive purchases<\/strong> with a longer life span <\/strong>. Some examples are furniture, machinery, cars, computers…. You do recover the vAT in one go. Even though you book a purchase as an investment, with corresponding depreciations that go over many years. So you recover the entire vAT amount on the purchase of an investment in one go via the vAT declaration. The government sets certain depreciation periods for each category, these are: <\/p>\n\n\n\n These are guidelines provided by the tax authorities themselves and you certainly don’t need to get bogged down with them! If you have arguments that make you choose other terms anyway, you can certainly deviate.
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<\/p>\n\n\n\nWhich purchases should you write off?
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<\/p>\n\n\n\nAnd if I am subject to VAT?
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<\/p>\n\n\n\nOver how many years should I depreciate? \u231b
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<\/p>\n\n\n\nbuildings<\/td> 20 to 30 years<\/td><\/tr> furniture<\/td> 5 to 10 years<\/td><\/tr> new vehicles<\/td> 5 years<\/td><\/tr> Used vehicles<\/td> 3 years<\/td><\/tr> Laptop<\/td> 3 years<\/td><\/tr> Mobile phone<\/td> 3 years<\/td><\/tr> Machines<\/td> 10 years<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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