Degressive abschreibung

What Is Degressive Abschreibung?

Degressive Abschreibung, also known as declining balance depreciation, is an accelerated method used in accounting and tax to systematically reduce the Buchwert of an Anlagevermögen over its Nutzungsdauer. This method falls under the broader financial category of asset depreciation methods and is characterized by higher Abschreibung amounts in the initial years of an asset's life, which gradually decrease over time. It contrasts with straight-line depreciation, where the depreciation expense remains constant each year.⁷⁰, ⁷¹ The degressive Abschreibung aims to reflect the economic reality that many assets, such as machinery or vehicles, lose a larger portion of their value and productivity in their early years of use.⁶⁸, ⁶⁹

History and Origin

The concept of accelerated depreciation methods, including degressive Abschreibung, emerged to better align the recorded decline in an asset's value with its actual economic utility. Many assets experience a more significant loss in value due to wear and tear or technological obsolescence in their initial years. In Germany, the ability to apply degressive Abschreibung has been subject to various legislative changes over time, often introduced or withdrawn as a tool for economic stimulus or tax policy. For instance, it was largely phased out for tax purposes in 2008 and 2011, but temporarily reintroduced multiple times to stimulate investments. A significant reintroduction occurred in 2020 as part of the Second Corona Tax Aid Act, allowing degressive Abschreibung for movable assets acquired or produced between December 31, 2019, and January 1, 2022.⁶⁶, ⁶⁷ More recently, the Wachstumschancengesetz (Growth Opportunities Act) has again facilitated its use for certain assets acquired between April 1, 2024, and January 1, 2025, and subsequently for assets acquired between July 1, 2025, and January 1, 2028, reflecting its role as a governmental incentive for corporate investment.⁶², ⁶³, ⁶⁴, ⁶⁵ The legal framework for depreciation, including degressive Abschreibung, is primarily defined within the Einkommensteuergesetz (§ 7 EStG) in Germany.

Key Takeaways

• Degressive Abschreibung is an accelerated depreciation method that results in higher depreciation expenses in the early years of an asset's life.
• It is often used for assets that experience a more rapid decline in value and productivity when new.
• This method can offer tax benefits by reducing taxable income in the initial years, potentially improving Cashflow.
• In Germany, the application of degressive Abschreibung is subject to specific Steuerrecht regulations and has been temporarily reintroduced in periods to stimulate investment.
• A switch from degressive to straight-line depreciation is often necessary to fully depreciate an asset, particularly when the straight-line amount exceeds the degressive amount.

Formula and Calculation

The degressive Abschreibung is calculated by applying a constant depreciation rate to the remaining book value of the asset at the beginning of each period. This rate is usually a multiple of the straight-line depreciation rate. In Germany, current regulations for certain periods have allowed the degressive depreciation rate to be up to 2.5 times the linear rate, not exceeding 25% of the book value.
⁶⁰, ⁶¹
The general formula for calculating the degressive Abschreibung for a given year is:

Where:

• (\text{Abschreibungsbetrag}_\text{Jahr n}) = Depreciation amount for year n
• (\text{Buchwert}_\text{Anfang Jahr n}) = Book value at the beginning of year n (for the first year, this is the Anschaffungskosten)
• (\text{Abschreibungssatz}_\text{degressiv}) = Constant degressive depreciation rate (e.g., a percentage)

For example, if the straight-line rate is 10% (for a 10-year useful life), the degressive rate might be 25% (2.5 times the linear rate, capped at 25%).
⁵⁹

Interpreting the Degressive Abschreibung

The interpretation of degressive Abschreibung centers on its implications for financial reporting and tax planning. By front-loading depreciation expenses, businesses can record higher Betriebsausgaben in the early years of an asset's life. ⁵⁷, ⁵⁸This can lead to a lower reported profit and, consequently, a reduced Steuerlast in those initial periods. This method is particularly beneficial for companies that are growing rapidly or those frequently upgrading Vermögenswerte. I⁵⁵, ⁵⁶t reflects an accounting assumption that an asset provides more economic benefit in its early years, and its value depreciates more rapidly then, which aligns costs with the revenue generated from the asset. Conversely, in later years, the depreciation amounts become smaller, which means higher reported profits and tax liabilities in those periods compared to straight-line depreciation. Proper Finanzplanung is crucial when employing this method.

Hypothetical Example

Consider a company that purchases a new production machine for €100,000 on January 1st, with an estimated useful life of 5 years.

Step 1: Determine the straight-line depreciation rate.
Linear rate = 1 / Useful life = 1 / 5 years = 20%

Step 2: Determine the degressive depreciation rate.
Assuming a degressive rate of 2.5 times the linear rate, capped at 25% (as per historical German regulations for certain periods).
Degressive rate = 2.5 * 20% = 50%. Since this exceeds the 25% cap, the degressive rate used is 25%.

Step 3: Calculate annual depreciation:

• Year 1:

  • Book value at beginning of year: €100,000 (Anschaffungskosten)
  • Degressive Abschreibung: €100,000 * 25% = €25,000
  • Book value at end of year: €100,000 - €25,000 = €75,000

• Year 2:

  • Book value at beginning of year: €75,000
  • Degressive Abschreibung: €75,000 * 25% = €18,750
  • Book value at end of year: €75,000 - €18,750 = €56,250

• Year 3:

  • Book value at beginning of year: €56,250
  • Degressive Abschreibung: €56,250 * 25% = €14,062.50
  • Book value at end of year: €56,250 - €14,062.50 = €42,187.50

• Year 4: At this point, it is often beneficial to switch to straight-line depreciation for the remaining book value over the remaining useful life, as the straight-line amount might become higher than the degressive amount.

  • Remaining useful life: 2 years ⁵², ⁵³, ⁵⁴(Year 4 and Year 5)
  • Remaining book value: €42,187.50
  • Linear depreciation for remaining years: €42,187.50 / 2 = €21,093.75
  • Since €21,093.75 is greater than €14,062.50 (the degressive amount for Year 3, and certainly higher than degressive for Year 4 if continued), the company switches to linear depreciation.
  • Abschreibung for Year 4: €21,093.75
  • Book value at end of year: €42,187.50 - €21,093.75 = €21,093.75

• Year 5:

  • Abschreibung for Year 5: €21,093.75
  • Book value at end of year: €21,093.75 - €21,093.75 = €0 (or a nominal residual value like €1 for "Erinnerungswert" in German tax law)

This example illustrates how degressive Abschreibung front-loads t⁵⁰, ⁵¹he depreciation expense, offering earlier tax advantages.

Practical Applications

Degressive Abschreibung finds its primary application in the context of corporate finance and Steuerrecht. Businesses strategically employ this method to optimize their Steuerlast and improve Liquidität in the early stages of an asset's life. By claiming higher depreciation expenses sooner, companies can reduc⁴⁸, ⁴⁹e their taxable income, thereby deferring tax payments. This can be particularly advantageous for new businesses or those making substantial capital investments, as it provides an immediate boost to available funds which can be reinvested into operations or used for debt reduction.

The method is typically applied to movable [Anlagevermögen](https:/⁴⁶, ⁴⁷/diversification.com/term/anlagevermoegen), such as machinery, vehicles, and IT equipment, which tend to lose significant value shortly after acquisition due to rapid technological advancements or intensive initial use. However, certain asset classes, like buildings, land, and [Umlaufverm⁴⁴, ⁴⁵ögen](https://diversification.com/term/umlaufvermoegen), are generally not eligible for degressive Abschreibung under German tax law. The eligibility criteria and specific rates for degressive Abschreibun⁴², ⁴³g are periodically updated by legislative acts, such as the Wachstumschancengesetz, which dictates the periods and maximum percentages for its application.

Limitations and Criticisms

While degressive Abschreibung offers b⁴⁰, ⁴¹enefits, it also has limitations and faces criticisms. One notable drawback is that, mathematically, the book value of an asset using this method never reaches zero. To fully depreciate the asset, businesses typically need to switch to ³⁸, ³⁹straight-line depreciation at a certain point during the asset's useful life, usually when the annual linear depreciation amount for the remaining book value becomes equal to or greater than the degressive amount. This requires careful calculation and ongoing monitoring, adding compl³⁴, ³⁵, ³⁶, ³⁷exity to Buchhaltung.

From a financial reporting perspective, the front-loading of depreciation expenses can lead to lower reported net income in the early years of an asset's life, which might influence external perceptions of a company's short-term profitability. Although it can reduce immediate tax burdens, it essentially defers a ³³portion of the tax liability to later years, rather than eliminating it entirely. Critics also point out that the temporary reintroduction of degressive Abschreibung as an economic stimulus measure can lead to uncertainty for businesses, as its availability depends on changing government policies and specific acquisition periods. The declining balance method may also not be suitable for assets that ³¹, ³²do not experience significant wear and tear or obsolescence in their early years, potentially misrepresenting their true value over time.

Degressive Abschreibung vs. Lineare Abschreibung

The primary diff³⁰erence between degressive Abschreibung and Lineare Abschreibung lies in how the depreciation expense is allocated over an asset's useful life.

While degressive Abschreibung front-loads the depreciation and offers immediate tax advantages by reducing the reported profit on the Gewinn-und-Verlustrechnung, linear depreciation provides a predictable and consistent expense over¹³ the asset's life. The choice between these methods often depends on a company's specific financial strategy, the nature of the asset, and prevailing tax regulations.

FAQs

1. Which assets are eligible for degressive Abschreibung¹²?

Degressive Abschreibung typically applies to movable Anlagevermögen, such as machinery, vehicles, and office equipment. Generally, assets like buildings, land, and intangible assets are not e¹⁰, ¹¹ligible under standard German tax regulations for this method.

2. Can a company switch between degressive and lineare Abschreibun⁸, ⁹g?

Yes, a company using degressive Abschreibung can switch to Lineare Abschreibung. This is often done when the annual linear depreciation amount for the remaining book value becomes higher than the degressive amount, allowing for full depreciation of the asset. A switch from linear to degressive, however, is generally not permitted⁵, ⁶, ⁷.

3. Why would a company choose degressive Abschreibung?

Companies p⁴rimarily choose degressive Abschreibung to benefit from higher tax deductions in the early years of an asset's life. This can lead to a reduced Steuerlast, ³m/steuerlast) and improved Cashflow, which can be advantageous for reinvestment or managing initial investment costs. It also aligns the depreciation expense more closely with the higher initial productivity or value loss of certain assets.¹