Growth Opportunities Act: Improvement of depreciation conditions planned

December 1, 2023

On August 30, the Federal Cabinet approved the government’s draft Growth Opportunities Act. This marks the start of the legislative process, which is not expected to be completed until November or December of this year. The following planned changes, which are already relevant for current investment decisions, should be noted:

• For the acquisition/production of movable assets up to 31.12.2022, declining balance depreciation at 2.5 times the straight-line depreciation rate, up to a maximum of 25%, was also possible for tax purposes instead of straight-line depreciation. It is now planned to reintroduce declining balance depreciation for a limited period of time for purchases/productions after September 30, 2023 and before January 1, 2025.
• Introduction of degressive depreciation for residential buildings at 6% for a limited period of six years: As an economic and growth policy measure to promote residential construction and support the construction industry, the use of declining balance depreciation for buildings with decreasing annual amounts will be allowed for a limited period of time. The new declining balance method of depreciation can be calculated according to a fixed percentage of 6% of the respective book value (residual value). The new declining balance method is applied pro rata temporis in the year of acquisition or production. A transition from declining balance to straight-line depreciation is permitted, with further depreciation based on the residual value.

The declining balance method of depreciation for buildings should be applied only to buildings used for residential purposes, located in an EU or EEA member state and whose construction begins after September 30, 2023 and before October 1, 2029. In the case of buildings, the date of commencement of construction is the date of the notification of commencement of construction required under the relevant national legislation. In the case of acquisition, declining balance depreciation may be applied only if the binding contract is concluded with legal effect after 30.9.2023 and before 1.10.2029 and the taxpayer acquires the building by the end of the year of completion.

Note: The further course of the legislative process remains to be seen. Changes may still be made.