Key takeaways
- Depreciation of fixed assets spreads the cost of a durable asset over its useful life, year after year.
- The two most common methods are straight-line (equal yearly amounts) and declining-balance (heavier at the start).
- Since 1 January 2020, companies can no longer depreciate on a declining-balance basis for tax purposes and apply pro rata temporis in the first year.
- The period chosen must reflect the asset's real useful life, not a rate picked at random.
An SME that buys a machine, a vehicle or furniture does not deduct that spend in one go: it spreads it over time. That is the role of depreciation of fixed assets, an accounting and tax mechanism that decides over how many financial years a durable asset's cost weighs on your result. The stake is concrete: a reform that took effect on 1 January 2020 changed the rules for companies, and getting it wrong distorts both your taxable profit and the reading of your accounts.
This article explains what depreciation is, the two recognised methods, what changed for Belgian companies, and how to set a defensible period. To place depreciation within your financial statements, see Balance sheet and income statement of a Belgian SME.
What depreciation of fixed assets is
A fixed asset is an item meant to serve the business durably: a computer, a utility vehicle, an installation, purchased software. Unlike a supply consumed within the year, it renders service across several financial years. Belgian accounting law therefore requires spreading its cost over its probable useful life, rather than expensing it entirely in the year of purchase.
That spreading is depreciation. Each financial year bears a fraction of the cost, called the annual amount, which reduces the asset's carrying value and lowers the result. The underlying idea is to line up the charge with the period during which the asset actually contributes to the business.
Straight-line and declining-balance depreciation
Accounting knows two main methods. Straight-line depreciation spreads the cost in equal yearly amounts over the whole useful life: an asset depreciated over five years bears one fifth of its cost each year. It is the clearest method and, today, the rule for companies.
Declining-balance depreciation applies a higher rate in the early years, then a decreasing one: the charge concentrates at the start, when the asset loses the most value. The method better reflects the wear of some equipment, but it is more complex and, for tax purposes, it has been withdrawn from companies.
| Straight-line | Declining-balance | |
|---|---|---|
| Equal amounts each financial year | ||
| Heavier charge in the early years | ||
| Allowed for companies (assets from 2020) | ||
| Simple to track |
What changed for companies since 2020
The corporate income tax reform carried by the Act of 25 December 2017 (Belgian Official Gazette) tightened companies' depreciation rules, affecting fixed assets acquired or created from 1 January 2020. Two changes matter most for an SME.
First, declining-balance depreciation is no longer allowed for companies for tax purposes: only the straight-line method survives. Second, the first year's amount is deductible only pro rata temporis, that is, in proportion to the part of the financial year elapsed between the purchase and the closing date. Previously, a small company could deduct a full year's amount in the year of acquisition, whatever the month of purchase; that advantage is gone.
- 1
Before 2020
Old regimeA small company could depreciate on a declining-balance basis and deduct a full year's amount in the year of purchase.
- 2
Act of 25 December 2017
AdoptionThe corporate income tax reform schedules the removal of declining-balance and the extension of pro rata temporis.
- 3
From 1 January 2020
Entry into forceFor assets acquired or created on or after that date: straight-line only, and pro rata temporis in the first year.
These rules target companies. Self-employed individuals fall under a separate regime, with its own options; if your situation is unclear, your accountant decides.
Which depreciation period to use
The core rule is simple to state: the depreciation period must match the asset's probable useful life. A rate is not defensible because it flatters the result, but because it reflects the asset's economic reality. Practice has settled on customary periods per category, which serve as a benchmark.
Commonly used depreciation periods
Buildings
Depreciated over a long span, often in the range of 20 to 33 years depending on the type of construction.
Plant and equipment
Generally 5 to 10 years, depending on intensity of use.
Furniture and fittings
Often around 10 years.
IT equipment
A short span, in the order of 3 years, because of rapid obsolescence.
Vehicles
Frequently depreciated over about 5 years.
These periods are practice benchmarks, not rates imposed by law: each business must be able to justify its own against the asset's actual use. Once set, the depreciation plan applies systematically and consistently from one financial year to the next.
Incidental costs and small companies
The cost to depreciate is not only the purchase price: it includes incidental costs, such as transport, installation or non-deductible VAT. Before the reform, a small company had an extra option for these costs: depreciating them at a freely chosen pace. For assets acquired from 1 January 2020, that option is gone.
A small company nonetheless keeps a choice: either expense the incidental costs in one go in the year they are incurred, or depreciate them at the same pace as the main asset. Large companies, by contrast, must depreciate them at the asset's pace. It is a point to watch when recording a purchase, because it changes the deductible charge of the first financial year.
Compliant invoices, accounting that keeps up
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What this changes for your SME
Depreciation is not just a technical entry: it drives your taxable profit and the value of your assets on the balance sheet. Choosing the right method and a defensible period avoids two symmetrical traps: inflating the result by depreciating too slowly, or artificially compressing it by depreciating too fast.
Since 2020, companies' room for manoeuvre has narrowed: straight-line only, pro rata temporis from the first year, and one option fewer on incidental costs. The useful habit is to keep an up-to-date depreciation schedule, clearly laid out, linked to each asset, so that each year's charge is traceable and justifiable in the event of an audit. For the recording mechanics, see The general ledger and the trial balance.
Further reading
- Balance sheet and income statement of a Belgian SME: where depreciation appears in your accounts.
- The general ledger and the trial balance: how the yearly amount is recorded.
- The minimum standardised chart of accounts (PCMN): the fixed-asset and depreciation accounts.
The substantive rules sit in the Income Tax Code 1992 (deductible depreciation) and Belgian accounting law; the methods are commented on by the Belgian Accounting Standards Board.
What is depreciation of fixed assets?
Depreciation is the accounting spread of a fixed asset's cost over its probable useful life. Instead of expensing the purchase in one go, the business spreads the cost across several financial years, to reflect the asset's wear or obsolescence over time.
What is the difference between straight-line and declining-balance depreciation?
Straight-line depreciation spreads the cost in equal yearly amounts over the whole useful life. Declining-balance depreciation applies a higher rate in the early years, then a decreasing one. Since 1 January 2020, the declining-balance method is no longer allowed for companies for tax purposes.
Is declining-balance depreciation still allowed in Belgium?
For companies, no: the Act of 25 December 2017 abolished declining-balance depreciation for fixed assets acquired or created from 1 January 2020. The straight-line method is now the rule. Self-employed individuals fall under separate rules.
How do you choose the depreciation period for an asset?
The period must match the asset's probable useful life. Practice uses customary periods per category (for example several years for furniture, fewer for IT equipment), but the rate must stay consistent with the asset's economic reality.
Does invoicing software handle depreciation?
Accounting software keeps the depreciation schedule, computes the yearly amounts and links each asset to its account. YouInv focuses on invoicing and Peppol compliance; recording depreciation belongs to your accounting tool or your accountant.
