Arbitrary depreciation

Arbitrary depreciation from 1 July 2013

On 1 July 2013 the arbitrary depreciation ruling (2001) was amended by State Secretary of Finance Weekers for certain investments made in the second half of 2013. The rule has been amended with hopes stimulating business investment and economic development. Although it is named arbitrary depreciation the ruling is in fact a case of accelerated depreciation. In this tip of the month we aim to help you take advantage of the benefits brought about by this rule change.

Amended ruling in a nutshell
The ruling is only applicable to new business assets purchased in the second half of 2013. The rule does not apply to the following assets: buildings, houseboats, scooters, motorcycles, cars (apart from very economical cars), intangible assets, animals, roads and paths, assets provided mainly to third parties, and assets which are arbitrarily depreciated for another reason.

In addition the purchased assets must be put to use before 1 January 2016.

Accelerated  depreciation
The rule makes it possible to do a one-time depreciation of up to a maximum of 50% of the purchase and production costs in 2013. The remainder of the purchase and production costs must be depreciated in the usual way.

Depreciable amount
To apply the rule you first have to deduce the depreciable amount. The depreciable amount is the purchase price less the residual value. 50% of the depreciable amount may then be deducted from income as depreciation costs.
The remaining amount of the depreciable amount may be depreciated time-proportionately over the asset’s remaining useful life. The arbitrary (accelerated) depreciation is only possible in 2013, and may not be used in any following years.

Payment criteria
The law states that for arbitrary depreciation the depreciation can take place before the asset is put to use. With normal depreciation you can only depreciate the asset from the moment the asset is put to use. The arbitrary accelerated depreciation can only be applied on the amount actually paid for the asset in 2013. Of course, accelerated depreciation is also possible if the asset is put to use in 2013 regardless of whether payment for the asset takes place in 2013. If the asset is put to use in 2014 or a later year and there is no (pre)payment for the asset in 2013, then no accelerated depreciation is possible.

More information
Would you like more information about the application of accelerated depreciation? Feel free to contact us.