Investment allowance and ecological investment allowance

As part of the 2022 ecologic-social tax reform law, the investment allowance (IFB) has been reintroduced in a modernized version. The IFB is regulated in § 11 of the EStG and can be claimed for business assets acquired or manufactured (completed) since January 1, 2023.

The IFB has always sought to create investment incentives for profitable companies by allowing additional operating expenses to be claimed in the year of purchase. The IFB is dependent on the volume of investment made and leads to a real tax saving, not merely a deferral of tax. In principle, the IFB is 10 % of the purchase or production costs – in the sense of an incentive for climate-friendly investments, the IFB increases to 15 % when the investment comes from the greening sector.

The modernized IFB is capped at an acquisition or production cost of €1 million per economic year per business (the maximum IFB is therefore €100,000 or €150,000) - in the case of fiscal years, it must be allocated in aliquot portions (1/12 of the maximum amount for each month). If the acquisition or production extends over more than one fiscal year, the IFB can also be claimed from the activated partial amounts of the acquisition costs or production costs that are due for each individual year (opt-in - alternatively, the entire IFB can be claimed in the fiscal year of completion). Due to the capping of the IFB, the simultaneous claim of similar qualifying measures, such as the research grant or the investment grant, is not critical. The IFB also has no impact on the ongoing depreciation of the respective economic asset. However, the IFB cannot be claimed for business assets for which the investment-related profit exemption has been claimed.

Excluded from the IFB are commercial goods for which a special form of the AfA is provided (in particular buildings and motor vehicles), although for ecological reasons, due to a de-inclusion by the IFB for electric vehicles, it is nevertheless granted. Furthermore, the IFB is not possible for low-value commercial goods that are immediately disposed of and for non-physical commercial goods that are not assigned to the areas of digitalization, ecologicalization, or health/life science (these are the categories of commercial goods for which the increased investment bonus could be claimed or the degressive AfA). In any case, non-physical commercial goods intended for free assignment or acquired by affiliated companies/controlling shareholders are excluded. An IFB can also not be applied for for used commercial goods, nor for installations that serve the promotion, transport or storage of fossil energy sources, or for installations that directly use fossil energy sources.

To be able to claim the IFB, an operational income type must be present and the profit determination must be made by comparing operating assets or a complete income-expenses statement (the IFB therefore does not apply when being generalized). The IFB must be entered in the tax return in the year of purchase or production at the appropriate location. For assets for which the IFB is claimed, it must be shown in the asset inventory or asset card. Compared to the IFB issued in 2001 (the old IFB), neither a balance sheet nor a tax declaration is required under corporate law or tax law.

The increased IFB of 15 % can be claimed for the purchase or production of organic economic goods. Details can be found in the Öko-IFB-VO (still in the draft stage). The higher benefit covers, for example, economic goods that are subject to the Environmental Promotion Act or the Climate and Energy Fund Act, emission-free vehicles without an internal combustion engine, as well as e-charging stations, bicycles, transport bicycles, etc., with and without electric drive, and bicycle trailers, or photovoltaic systems.

The business assets for which the IFB is to be used must have a normal useful life of at least four years and must be domestically sourced. If the business asset expires before four years have passed (in which case a precise assessment must be made), or if it is exported abroad, the benefit will be subject to reassessment. The reassessment (the IFB’s profit-increasing approach) will not apply if the asset’s expiry is due to force majeure or an official intervention. In cases of transfers under the Transfer Tax Act, the retention period for the rights of the successor remains in effect.

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