Link tax depreciation to WOZ value
On 1 January 2007 the ‘Work on profit’ law (read profit for the tax authorities) came into effect. This stipulates that the depreciation on buildings is limited. The value up to which can be depreciated (the so-called bottom value) has been set for investment buildings at the WOZ value and for buildings in own use at half. The restriction only applies if there is a building. This is the case with a durable construction with walls and a roof that is not easy to move.
You write about the purchase value of the property. This is the purchase price including the purchase costs of the property. The purchase costs are, for example: notary fees, brokerage costs, transfer tax and VAT charged (if you do not have the right to deduct it as input tax).
The amount of the depreciation can be calculated as follows. The purchase value of (the business part of) the building (= A) is reduced by (a proportional part of) the value of the land belonging to the building (= G). You also take into account the residual value of the property (= R). The amount of depreciation per year is A – R – G x 2% (2% as 50 years).
The application of the annual depreciation on the property is only possible if:
- The book value of the property is higher than 50% of the WOZ value (= bottom value).
- The annual depreciation on your property does not exceed the difference between the book value and the land value.
TIP: for Holding and Management companies it may be useful not to write off the real estate in connection with the FLEX BV legislation.