Low-value assets, abbreviated to LVA, are assets that are part of a company’s fixed assets in accordance with Section 6 (2) of the German Income Tax Act (EStG) and whose acquisition costs , production costs or deposit value do not exceed EUR 800 (in the case of collective items, even up to EUR 1,000 net) . Low-value assets must be wearable, movable (not built into a building) and usable independently. Minor assets can be written off immediately.
What is a low value asset?
German income tax law defines a low-value asset (LVA) as part of fixed assets, the production or acquisition costs of which are a maximum of one thousand euros. The object must also be movable (i.e. not installed in a building), wearable and usable independently. A low-value asset can be written off immediately.
For the contribution limit of one thousand euros, the manufacturing or acquisition costs without input tax always apply. So you always start from the net acquisition costs, which also applies to small businesses who are not entitled to input tax deduction .
Additional costs for insurance and transport are added to the purchase price. Purchases of less than 250 euros are not low-value assets, but are deducted as business expenses. Acquisitions over a thousand euros are regularly depreciated over their normal useful life.
To determine the net acquisition costs, the following items must be deducted: 19 percent sales tax (in special cases only 7 percent sales tax), cash discount and other rebates, grants, the investment deduction amount and reserves for initial procurement.
Low-value asset: the requirements
According to Polyhobbies, certain limits apply to low-value assets. Acquisition costs arise for the acquisition of the low-value asset and for the transfer of the asset to an operational state. Costs for transport, shipping or insurance are also included in the acquisition costs. Acquisition price reductions and investment deductions must be deducted from the acquisition costs. The net price actually paid, including the acquisition costs, is therefore stated and thus asserted for tax purposes.
Movable economic goods are animals, things and pseudo-components. Land, buildings and parts of buildings are not moveable assets. Usage rights, licenses and patents are not movable assets either, they represent immaterial assets. None of these assets can be declared as low-value assets.
Depreciable assets are assets that are movable, immovable or immaterial and are subject to economic or technical wear and tear. Economic assets that can be used without other assets from the fixed assets of a company can be used independently. An independently usable asset does not have to be technically coordinated with other assets that may be used in connection with this low-value asset. Independently usable assets can be:
- Desktop computers and laptops
- Telephones and smartphones
- Computer accessories
What counts as a low-value asset?
Minor economic goods must be movable, wearable and independently usable.
Animals and things are movable assets. Buildings and parts of buildings as well as land are by their nature not movable assets. Licenses, patents and rights of use are also not movable goods, but intangible assets. These goods can therefore not be declared as low-value economic goods.
An economic asset is wear-and-tear if it is subject to technical wear and tear or economic wear and tear. It does not matter whether the good is material or immaterial. Software can also be “worn out”, i.e. no longer up-to-date.
A low-value asset is self-employed if no other fixed assets are required to use it. It does not necessarily have to be technically coordinated with other assets when used. Laptops and desktop computers, furnishings, tablets, smartphones and telephones, for example, are used independently.
Depreciation on low value assets
In the case of income from non-self-employed work, from renting and leasing as well as other income, the expenses for minor assets up to an acquisition value of 800 euros plus sales tax can be claimed immediately as income-related expenses. Since January 1, 2010, the Growth Acceleration Act has included regulations for low-value assets. If the acquisition costs are up to 250 euros net, an immediate write-off or a write-off can be used be carried out after normal usage time. Immediate depreciation can be made for acquisition costs of between 250.01 and 800 euros net, but depreciation can also be made after the normal useful life or for collective items over 5 years. For acquisition costs between 250 euros and 1,000 euros, collective items can be depreciated over 5 years or depreciated over the normal useful life.
The net purchase price is crucial
The net purchase price is decisive for low-value assets; this also applies to small businesses who are not entitled to input tax deduction . Additional costs for transport and insurance are added to the purchase price. If the value is less than 250 euros, the purchases do not count as minor assets; they can be deducted as business expenses. If the acquisition value is more than 1,000 euros, regular depreciation must be made over the normal useful life. In order to determine the net acquisition costs, 19 percent sales tax (in special cases only 7 percent sales tax), cash discounts and other discounts, grants, reserves for initial procurement and the investment deduction must be deducted from the gross acquisition price.
Low-value asset and the inventory
If low-value assets were written off in full in the year of acquisition or manufacture, they do not have to be included in the inventory . All fixed and current assets that were recorded in an inventory can be found in the inventory .
Depreciation for low-value assets: collective items
If independently usable low-value assets were acquired or manufactured after December 31, 2009 and the acquisition or manufacturing costs are between 250 and 1,000 euros, they can be included in a collective item for each financial year. From the year of acquisition or manufacture, this collective item must be broken down by one fifth. The operational useful life, interim sales and depreciation of the individual assets must be taken into account. With pool depreciation, it is not permissible to immediately write off individual assets with a value of up to 800 euros and to include other assets in the pool.
Private use of LVA
In the case of private use of an asset, the portion of the depreciation that is attributable to the private portion must be added to the profit. If the entrepreneur uses a telephone only 70% for business purposes, at a purchase price of, for example, 100 €, 30 € are counted towards the profit. The applicable sales tax must also be paid retrospectively.