Field help:
(2021)
Reduction amounts in accordance with section 7g, para. 2, sentence 2 of the Income Tax Act (EStG)
For the planned acquisition or production of movable fixed assets, you can deduct an investment deduction amount (IDA) of 50% of the expected acquisition or production costs, up to a maximum of 200.000 Euro, from off-balance-sheet profit (sect. 7g paras. 1 to 4 Income Tax Act (EStG)) (see page "Investment deduction amounts").
If the asset for which an investment deduction was formed is acquired or produced within the investment period of 3 years, the following applies:
- The investment deduction amount taken into account for the asset acquired is to be added, thereby increasing profits, off the balance sheet. However, the addition is limited to the amount deducted for the asset in question, up to a maximum of 50% of the acquisition or production costs.
- The actual acquisition or production costs of the asset will be reduced by the amount deducted from the investment (up to 50% of the acquisition or production costs), thereby reducing profits. However, the reduction may not exceed the amount of the investment deduction. This reduction amount must be entered in the books.
Note: The reduction reduces the basis of assessment for further depreciation, for both straight-line depreciation and special depreciation in accordance with sect. 7g paras. 5 to 6 Income Tax Act (EStG). This can lead to assets becoming "low-value" assets for tax purposes if the tax base falls below 800,01 Euro.
Already with the "Second Corona Tax Relief Act" of 29.06.2020, the investment period for investment deduction amounts that were created in 2017 and whose three-year period would have expired in 2020 was extended by one year to 31.12.2021 (sect. 52 para. 16 Income Tax Act (EStG)).
Currently, the investment periods according to sect. 7g Income Tax Act (EStG) are extended again: For investment deductions whose three-year or four-year investment period expires in 2021, the investment period is extended by one year to four or five years, respectively. This means: If the deduction amount is created in 2017 or 2018, the investment period will now only end on 31 December 2022 (sect. 52 para. 16 sentence 4 Income Tax Act (EStG), amended by the "Act to Modernise Corporate Income Tax Law").
