Tax Depreciation: How to Deduct Your Investments Year by Year Without Overdoing It

One of the questions self-employed professionals and small businesses ask most often is how to deduct the cost of a computer, a van, or a machine for tax purposes without running into trouble with the tax authorities. The answer is depreciation: the mechanism that spreads the cost of a fixed asset over the years it’s actually used, instead of deducting it all at once in the year of purchase. Applied correctly, it’s a legitimate tax planning tool; applied incorrectly, it’s one of the most common triggers for adjustments in tax audits.

Depreciation tables: the mandatory starting point

Corporate Income Tax rules (and, by extension, personal income tax for self-employed professionals under direct estimation) set official tables with a maximum straight-line rate and a maximum useful life for each type of asset: furniture, IT equipment, machinery, vehicles, buildings, and so on. Within that range — between the maximum rate and the maximum useful life — each business can choose whatever pace suits it best, as long as it’s reasonable and applied consistently over time. What’s not allowed is depreciating faster than the maximum permitted rate (which triggers a positive tax adjustment), or leaving assets undepreciated without justification.

Three basic points are worth keeping in mind: land is never depreciated, since it doesn’t lose value through use; depreciation starts counting from the moment the asset actually enters service, not from the invoice date; and the first and last years must be prorated by days or months whenever the asset is put into use or disposed of at a point other than January 1st.

The special allowance for small businesses: accelerated depreciation and low-value assets

Small and medium-sized businesses — broadly, those whose turnover falls below the threshold set by law for this regime — benefit from what’s commonly called “free depreciation,” although technically it’s accelerated depreciation: they can depreciate new tangible fixed assets and investment property by doubling the maximum rate set out in the official table. In practice, this means the investment can be deducted in half the time the standard table would require, bringing the tax saving forward to the earlier years.

There’s also a genuine free depreciation allowance for new, low-value tangible fixed assets, subject to a per-item cap and an overall annual cap, available to any business regardless of size. It’s commonly used for low-cost office equipment or tools, but it’s important to watch the aggregate annual limit, since any excess must still be depreciated according to the standard table.

Common bookkeeping mistakes worth checking for

Most issues don’t come from bad faith, but from bookkeeping oversights that carry over year after year. The most frequent ones: continuing to depreciate an asset after it’s been sold or written off, because no one updated the fixed asset record; applying a full year’s depreciation rate to an asset bought halfway through the year, without prorating; depreciating the full invoice value without deducting recoverable VAT, or without separating out the value of the land when a property is purchased together with the plot it sits on; and using different criteria for accounting purposes versus the tax return without documenting why they differ.

Another common failure is not recording, on each fixed asset’s file, the method chosen, the date it was put into service, and the rate applied: if the person handling the books changes, or if the tax authorities request justification years later, that record is the proof that the criteria have been applied consistently. The practical recommendation is to review the depreciation schedule at least once a year, cross-checking what’s posted in the accumulated depreciation accounts against what actually appears in the inventory and fixed asset register.

At Zythos Business, we build this fixed asset review into every year-end close: we check that every asset has its own record, that the depreciation pace chosen is still the one that best suits the business, and that what’s booked matches what’s been declared — so that self-employed professionals and small businesses can make full use of the margin the law allows, without surprises down the line.