Tax Tips for Year-End

• The tax law provides entrepreneurs – depending on sector and annual turnover – with various options for flat-rate profit determination. Therefore it makes sense to carry out a cost‑benefit calculation to check whether exercising such an option is tax‑advantageous. In addition to income‑tax considerations, the VAT aspect should not be overlooked, for example possibilities for flat‑rate input tax deduction or, where appropriate, the switch from the small‑business exemption to regular VAT taxation, for instance when larger investments have been made for which, under certain conditions, input tax could be reclaimed.
  
  
• Entrepreneurs earning income from a trade must, when annual turnover exceeds EUR 700,000 (second exceedance, a “buffer year”) or annual turnover exceeds EUR 1,000,000 (first exceedance, no “buffer year”), switch from cash‑basis accounting to accrual accounting.
  
  
• For the cash register a signed annual receipt (monthly receipt for December) must be printed, checked and retained at year‑end.
  
  
• For the shareholder‑managing director tax optimisation opportunities may arise in the area of corporate tax, social security, payroll costs related to income from a classic or freelance employment relationship and also from dividend income, as well as VAT.
  
  
• For newly acquired or produced assets (with exceptions) a depreciation of up to 30% of the residual book value can be applied. The higher depreciation at the start of the useful life usually leads to cash‑flow benefits for long‑lived assets, as after three years roughly 66% have been depreciated for tax purposes. Switching from declining‑balance to straight‑line depreciation makes sense when the straight‑line rate exceeds the declining‑balance rate. For buildings newly acquired or constructed after 30 June 2020, accelerated depreciation applies.
  
  
• The corporate tax burden can be influenced by advancing expenses for accrual accountants or by advancing expenditures and deferring income for cash‑basis accountants under certain conditions. For example, expenses/payments for maintenance or repairs of business premises or machinery can be fully deducted as operating expenses if they are incurred in the current year. Cash‑basis accountants may only deduct advance payments for certain costs (e.g., consulting, rent, distribution, administrative, interest costs etc.) immediately for the current year and at most the following year; beyond that a spread is required. Furthermore, regularly recurring income or expenses are to be allocated to the fiscal year in which they economically belong if they occur within 15 days before or after 31 December.
  
  
• In connection with the investment allowance and the investment‑related profit allowance, it must be noted that the same assets cannot be used for both incentives simultaneously. Consequently, a cost‑benefit comparison should be carried out for each asset to determine which incentive the asset should be assigned to.
  
  
• Donations from business assets to certain qualifying institutions are tax‑deductible up to a maximum of 10% of the profit of the current financial year. To have such donations deducted in the year 2025, they must be made no later than 31 December 2025.

Note
A careful review of the individual tax situation at year‑end can be worthwhile. Many measures are only effective if they are implemented in time before 31 December 2025. We therefore recommend reviewing planned investments and measures early and adjusting them where necessary. We are happy to assist you in identifying individual optimisation opportunities.