Expense vs Investment in the Netherlands (2026): €450 Rule, Depreciation, and KIA

When is a business purchase an expense vs an investment for Dutch income tax (inkomstenbelasting)?

For Dutch income tax (inkomstenbelasting), a purchase is usually an investment (bedrijfsmiddel) when the item is used in the business for more than 1 year and is not meant for resale. The cost is not deducted in 1 go; you spread the deduction through depreciation (afschrijving) over the useful life. A low-value business asset under €450 can be deducted immediately as a business cost.

Browse the [Knowledge Hub](/knowledge-hub) for more freelancer accounting guides. The expense vs investment decision changes the year you get a deduction and the profit you report. A €1,200 laptop booked as an expense would reduce profit in 2026, but multi-year business assets are normally treated as investments and depreciated over time. For day-to-day costs, see the guide to deductible business expenses (/knowledge-hub/deductible-expenses-freelancers-netherlands/).

Business assets are items you use in the business and do not intend to sell, such as equipment, tools, or licenses. The acquisition cost includes the purchase price plus purchase and installation costs, minus discounts or subsidies. If VAT (btw) is deductible in the VAT return (BTW-aangifte), the asset is valued excluding VAT; if VAT is not deductible, the asset is valued including VAT.

• Confirm the purchase supports business activities (for example, client work or deliveries).
• Check whether the item will be used longer than 1 year.
• Check the purchase price per business asset: under €450 (excl. VAT when VAT is deductible) is usually an expense; above €450 is usually an investment.
• Combine parts that function as 1 asset (for example, a €350 computer + a €150 monitor = a €540 asset).
• Decide the business-use percentage (for example, 80% business and 20% private) for both the profit calculation and VAT.
• Keep the invoice and payment proof so the classification can be justified in an audit.

How does the €450 threshold work, and when do small purchases still count as 1 investment?

Under Dutch income tax rules, a business asset with an acquisition value below €450 can be deducted in full in the year of purchase instead of being depreciated. The €450 test is per business asset and is usually applied excluding VAT when VAT is deductible. If multiple items together form 1 asset, the combined value can exceed €450. Business assets below €450 do not count toward the Small-Scale Investment Deduction (KIA).

The €450 threshold helps freelancers avoid depreciation for small tools and equipment. The amount is based on the acquisition cost used in the profit calculation: excluding VAT when VAT can be reclaimed, and including VAT when VAT cannot be reclaimed. Discounts and subsidies reduce the acquisition cost, even if received later. The threshold applies to each business asset, not to the total bill.

Some purchases work as one functional unit. The tax authority can treat several related purchases as 1 business asset if the parts belong together, which can push the value above €450. A common example is a computer setup: a computer, screen, mouse, and keyboard may be treated as one asset when the parts are needed to use it. Treat bundles consistently across the year.

How do you calculate depreciation (afschrijving) on an investment in 2026?

To depreciate a business asset (bedrijfsmiddel), you need 3 inputs: acquisition cost, expected residual value (restwaarde), and expected useful life in whole years. The common linear method is: annual depreciation = (acquisition cost − residual value) ÷ useful life. If the asset is used part-year, depreciate only that fraction (for example, 3/12). Annual depreciation is capped at 20% of acquisition cost; for goodwill it is 10%.

Example (linear depreciation): a machine costing €30,000 with a €5,000 residual value and a 10-year useful life gives (€30,000 − €5,000) ÷ 10 = €2,500 depreciation per year. If the machine is bought on 1 October, only 3/12 of the annual amount is deductible in that first year: 3/12 × €2,500 = €625. Use the same formula for any business asset by replacing the numbers.

Depreciation stops once the book value reaches the residual value. If you sell an asset for more or less than the book value, the difference is reported as a gain or loss in that year. After 8 years of €2,500 depreciation, a €30,000 asset has a €10,000 book value. Selling for €11,500 creates a €1,500 gain; selling for €7,500 creates a €2,500 loss.

Can you reclaim VAT (btw) on investments, and what are the 5-year / 10-year adjustment rules?

VAT (btw) on an investment is usually reclaimable in the VAT return (BTW-aangifte) when the purchase is used for VAT-taxed activities. For VAT, investment goods include movable assets you depreciate for income tax; the VAT deduction is monitored for 5 years (year of first use + 4). For immovable property it is 10 years (year + 9). Since 1 January 2026, investment services also have a 5-year period, and changes above 10% require an adjustment.

VAT rules and income-tax rules overlap but are not identical. The VAT adjustment system uses the idea of an investment good that is depreciable for income tax, and then checks the actual taxable vs exempt use during the adjustment period. This matters if the business-use percentage changes over time or if the business starts delivering VAT-exempt services. For VAT return basics, see the VAT return guide for freelancers (/knowledge-hub/vat-returns-netherlands-expat-freelancer-guide/).

Since 2026, major renovation or improvement work can be treated as an investment service with a 5-year adjustment period. In an official example, a renovation costing €700,000 plus €147,000 VAT was fully reclaimed in the first year because the use was 100% taxable. If later use becomes partly VAT-exempt, part of the VAT must be repaid over the remaining years when the change exceeds 10%.

• Keep an invoice that meets VAT invoice requirements and shows the VAT amount.
• Claim deductible VAT in the correct VAT return period (monthly, quarterly, or yearly).
• Record the expected business-use percentage in the year the asset is first used (for example, 70% business use).
• Re-check the taxable vs exempt use each year during the adjustment period (5 or 10 years).
• Adjust VAT if the annual change compared to the first year exceeds 10%.
• Document changes (for example, switching to VAT-exempt services) that affect the VAT deduction.

Do investments qualify for the Small-Scale Investment Deduction (KIA) in 2026?

In 2026, the Small-Scale Investment Deduction (kleinschaligheidsinvesteringsaftrek, KIA) applies if the total annual investment in qualifying business assets is €2,901–€398,236. The deduction is 28% for €2,901–€71,683, then a fixed €20,072 for €71,684–€132,746, and then €20,072 minus 7.56% of the amount above €132,746 until the deduction becomes 0% above €398,236.

KIA is an extra deduction from taxable profit on top of depreciation: depreciation spreads the cost, while KIA reduces profit immediately in the investment year. KIA is calculated on the total qualifying investment amount per enterprise in the calendar year. Example: if qualifying investments total €10,000 in 2026, the KIA is 28% × €10,000 = €2,800.

If a qualifying business asset is sold, gifted, moved to private use, or rented out within 5 years after the start of the calendar year of investment, part of the earlier investment deduction can be added back to profit via the disinvestment addition (desinvesteringsbijtelling). The add-back uses the same percentage that was used for the earlier investment deduction, and it is never higher than the earlier deduction.

• Track each qualifying business asset investment and its acquisition date in 2026.
• Sum the qualifying investment amounts per enterprise for the calendar year.
• Check whether the total qualifying investment is at least €2,901 and no more than €398,236.
• Use the correct KIA band to calculate the deduction (28%, €20,072 fixed, or the 7.56% reduction).
• Keep invoices and proof of payment for each investment so the totals are defensible.
• Check the 5-year disinvestment rule before selling, gifting, renting out, or moving the asset to private use.

What happens if you book an investment as an expense (or vice versa)?

Correct the bookkeeping and amend the tax return if needed. Income tax returns can be changed up to 5 years after the tax year. VAT errors (this year or the past 5 years): up to €1,000 goes into the next VAT return; above €1,000 needs a Suppletie btw. Late VAT payment can trigger a 3% penalty (min €50, max €6,709). Late income tax filing can trigger a €469 penalty.

Fix the bookkeeping first so the journal entries match the real-life situation (expense vs business asset). Then correct VAT and income tax in that order, because VAT corrections can depend on the purchase classification and business-use percentage. If VAT was underpaid, pay quickly to limit interest and penalties. For income tax, submitting a correction within the 5-year window reduces the chance that an incorrect return stays on record.