How to claim depreciation and full deductions for low-value assets – self-employed operators of trade or business
Deductions are offered for the money spent on purchases of goods that are necessary for you to operate your business (or to work in your trade). This spending is called purchases of “fixed assets”. Fixed assets are property dedicated to business use. Examples include buildings, machinery and equipment that are intended for the permanent, ongoing operation of the trade or business.
Fixed assets are either deductible in the form of annual depreciation, or in some cases deductible at once.
Useful life max. 3 years or purchase price max. €1,200
After you have bought a fixed asset with an estimated useful life of three years or less, you are allowed to treat its price as a single tax-deductible expense.For assets with useful life max 3 years, there is no upper limit for the purchase price. Another situation where the price can be seen as a single tax-deductible expense is when the asset falls into the category of “low-value assets”.
Assets of low value include a telephone, a tool or another small single item that you book among the fixed assets in your business bookkeeping, and you paid max. €1,200 for it.
You can deduct small fixed assets like this for €3,600 per year in total.
Example: You have purchased a mobile phone for €295, a computer for €795, and a cash register for €500. Under the tax-deduction rules on fixed assets of low value, you can deduct €295 + €795 + €500 = €1,590 this year.
Claiming the deductible expenses
Enter the low-value assets’ prices under Other deductible expenses on the tax return. You can find Other deductible expenses under “Expenses” in MyTax.
Useful life is longer than 3 years or purchase price exceeds €1,200
Tax rules require that the price you paid for a more expensive fixed asset can only be deducted in the form of depreciation expenses; this means that you must spread out the deduction across several years.
The entries in your tax accounting reduce the total value of your fixed assets: the depreciation expenses diminish the remaining value. A frequently used synonym for fixed assets’ remaining value is “residual acquisition cost”. The following year, the calculation must be based on a percentage of the remaining value, i.e. in the next year’s tax calculation, you cannot use the price that you had paid for the asset anymore.
The year when the asset’s remaining value is only €1,200 or less, you no longer need to calculate a depreciation amount because now you can deduct the entire amount at once.
Example: Pekka runs a pizza restaurant as a self-employed owner. In 2016, he invested €30,000 in restaurant furniture, fittings and equipment. They are Pekka’s business's fixed assets. His business bookkeeping has treated the 30,000-euro cost as an expense depreciable in the course of several years. Every tax year, Pekka books a depreciation expense for them, getting a tax-deduction. Up to 25% of residual cost can be depreciated every year. Because of the restaurant’s growth, Pekka buys a new, additional oven. The acquisition cost is €5,700. If Pekka were to buy yet another oven during 2020, he’d have the right to accelerate the depreciation, getting a higher deduction of 50% of the oven’s price.
Pekka makes the following entries:
| Tax year | Undepreciated balance at the end of the tax year, € | Depreciation for the tax year, € | Remaining cost value (=residual acquisition cost) at the end of the tax year, € |
|---|---|---|---|
|
2016 |
Total price paid €30,000 |
€7 500 |
€22 500 |
|
2017 |
€22 500 |
€5 625 |
€16 875 |
|
the oven purchased in 2018 (€5,700 is added to fixed assets’ resid. acq. cost) |
€16 875 + €5 700 = 22 575 |
€5 643,75 |
€16 931,25 |
| 2019 | €16 931,25 | €4 232,81 | €12 698,44 |
However, if you buy some new assets for business purposes again, you must add their prices to the value remaining from previous years.
Example: How to subtract the book value of a fixed asset you give away as a trade-in. In 2019, Pekka replaces the restaurant’s pizza delivery van. The new motor vehicle costs €10,000 minus the trade-in value of Pekka’s old van, €2,000. Pekka’s books indicate that at the end of the previous tax year, the restaurant’s fixed assets’ remaining undepreciated acquisition cost (resid. acquisition cost) stands at €16,931.25.
| From this, it follows that also the undepreciated acquisition cost at the start of the 2019 tax year is | €16 931,25 |
| Enter the new vehicle’s acquisition cost, € | + 10 000,00 |
| Enter the subtracted trade-in value of the old vehicle | -2000,00 |
|
The restaurant’s fixed assets’ acquisition cost at tax year’s end, before depreciation |
= 24 931,25 |
|
Enter depreciation 25% |
6 232,81 (25% of €24,931.25) |
|
Remaining acquisition cost at the end of tax year 2019 |
18 698,44 |
Depreciation for machines and equipment in business use (moveable fixed assets)
Under the tax rules in effect, 25% per year of the value of machinery, equipment and similar fixed assets is the maximum depreciation expense.
Accelerated depreciation during 2020–2025 is available at the rate of 50% for new machinery and equipment
The machine or piece of equipment has to have been entered into service on 1 January 2020 or later. If you use machines in your business or trade that are both new and old, you have to differentiate the new machines for which accelerated depreciation is allowed. Your bookkeeping must contain separate entries for them.
Read more about the depreciation rules (in Finnish and Swedish)
How to claim depreciation expenses
Read the MyTax guide to find further instructions, look up the sub-heading Depreciation.
For a list of acceptable rates of tax-deductible depreciation for various types of business assets, see the instructions for completing Form 62 (in Finnish and Swedish).If you are a MyTax user, you can apply the rates automatically.
Note: No tax-deductible depreciation expensing is possible for fixed assets that are permanent. This means land, shares, securities (including housing-company shares and corporate stocks), etc., as they are assets not exposed to wear and tear.