The broad tax reform: implications for the investment deduction

Moreover, the minister's proposal excludes certain taxpayers from the new system:

• The taxpayer must not have any overdue debts with the National Social Security Office;
• The taxpayer may not be classified as a company in difficulty on the last day of the taxable period in which the fixed assets in question were acquired or created;
• No state aid repayment order may be outstanding against the taxpayer;
• No regional aid may have been or be applied for (unless the maximum aid intensity is not exceeded).

Investment deductions will now also exclude investments based on or using fossil fuels, except for those allowed under the increased thematic or technology deduction or if no economically comparable carbon-free alternative is available.

It should also be noted that while the proposal introduces increased deductions on the one hand, it also seeks to get rid of certain existing deductions. These include the abolition of the 120% deduction for bicycle and speed spedelec use. These vehicles would, however, be able to enjoy the increased thematic deduction (emission-free transport) in the future.

First, a basic deduction is provided. This is similar to the current ordinary deduction. This deduction is 10% for natural persons and small enterprises and is not applicable to large enterprises. To benefit from this deduction, no special notification procedure is provided.

The purpose of this deduction is to support taxpayers to make investments that are necessary in the day-to-day operations of the business, and these would bring future benefits to the business.

Secondly, there is the increased thematic deduction, through which the Minister wants to encourage specific investments. This deduction would be 40% for individuals and small businesses, and 30% for large companies.

The purpose of this deduction is to encourage companies to make certain investments that pursue a societal purpose. The law mentions the themes within which the investments should be made. These include investments in energy efficiency and renewable energy, investments in emission-free transport and environmentally friendly investments. Digital investments that support previous goals will also be able to enjoy the deduction. The list of investments will not be included in the law, but should be laid down by RD. The list will remain valid for a period of five years. In line with the stated purpose, this deduction will be denied if the investment would cause unreasonable harm to the living environment.

For investments benefiting from the increased thematic deduction, it is also possible to make use of a double linear depreciation. This means that an annual depreciation can be applied equal to twice the normal linear depreciation annuity on investments in fixed assets listed in the RD at the time of acquisition or creation.

Finally, there is the technology deduction, which is similar to the current enhanced investment deduction. This deduction is granted for investments in patents and investments in environmentally friendly R&D. It is required that the fixed assets used to promote the R&D of new products and future-oriented technologies have a clear and demonstrated positive impact on the environment or that aim to minimize the negative impact on the environment of existing products and technologies. Again, the deduction will be refused if the investment causes unreasonable harm damage to the living environment.  

The amount of the deduction depends on whether the deduction will be one-off or spread. The deduction amounts to 13.5% and 20.5% respectively. In case of a spread deduction, the deduction will happen in parallel to the depreciation period.