Depreciation: How to Write Off Your Business Assets Without Overdoing It

Buying a computer, a van, or renovating your premises isn’t an expense you can deduct all at once: tax authorities require you to spread the cost over time through depreciation. It’s one of the areas where freelancers and small businesses trip up most often, either because they don’t know the percentages set by law, or because they’re unaware there are perfectly legal ways to speed up the deduction. This guide covers what depreciation is, how to calculate it using the official tax table, the advantages available to small businesses, and the most common bookkeeping errors.

What depreciation is and how to calculate it with the tax table

Depreciating an asset means recognizing, year after year, the loss in value of something you’ll use in your business over several years: machinery, furniture, computer equipment, vehicles, fixtures, or your own premises if you own them. Land isn’t depreciated, since it doesn’t lose value through use, and neither are assets consumed within a single year (those go straight to expense).

Corporate income tax rules (and personal income tax rules for self-employed workers under direct estimation) set out a depreciation table with a maximum straight-line rate and a maximum useful life for each type of asset. Computer equipment, for example, is typically depreciated at around 25% a year (4 years), while furniture and fixtures carry lower rates over longer periods, and industrial buildings depreciate much more slowly, over several decades. Within that range — between the maximum rate and the maximum useful life — taxpayers can choose whatever pace suits them best, as long as it’s reasonable and applied consistently over time.

A round-number example: a machine worth €12,000 depreciated at 12% a year generates €1,440 in annual depreciation, deductible as an expense in corporate tax or against business income for personal income tax purposes. If the asset is purchased partway through the year, the standard practice is to prorate the depreciation for that first year based on the actual days or months of use, rather than applying a full year’s charge.

Free depreciation: the advantage for small businesses

Small and medium-sized businesses — those below the revenue threshold set by law for that classification — have access to additional tax incentives, including free depreciation or accelerated depreciation schemes for certain investments in new tangible fixed assets, often tied to maintaining or creating jobs. In practice, these let you deduct the cost of an asset faster than the standard table allows, bringing the tax savings forward to the early years instead of spreading them across the asset’s entire useful life.

That doesn’t mean you can depreciate “however you like”: the workforce requirements, eligible investment types, and quantitative limits vary depending on the applicable regime, and they’re worth checking case by case before applying the benefit — using it incorrectly can end up triggering a tax adjustment with surcharges and interest.

Common mistakes that creep into the books

In day-to-day practice, the mismatches between what an asset’s record shows and what the books actually reflect tend to follow the same patterns:

Continuing to depreciate an asset that’s already been sold or written off, because nobody updated its fixed-asset record. Applying a different rate than the one used the previous year without justification, breaking the consistency of the calculation. Forgetting to post accumulated depreciation to its own account and leaving it only as an expense entry, so the balance sheet no longer reflects the asset’s true net value. Depreciating land or other non-depreciable items. And, above all, failing to reconcile what the depreciation table says each year against what’s actually been recorded — something that only comes to light when the fixed assets are reviewed in an orderly way, whether by hand or with accounting software.

At Zythos Business we regularly review our clients’ fixed assets to make sure each one has the correct record, rate, and accounting entry, and to make the most of the depreciation incentives a business is entitled to without taking on unnecessary risk with the tax authorities. If you handle your own bookkeeping and aren’t sure your depreciation figures add up, it’s worth checking before the tax office checks for you.