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Should I still invest in 2022 or better wait until 2023 ?

Should I still invest in 2022 or better wait until 2023?

Are you planning to acquire a new office space or warehouse, but are doubting to proceed due to rising mortgage rates?

Are you convinced that crypto mining is still worth it and were planning to buy a new mining rig?

You have your eyes on a competitor and want to make him an offer he can’t refuse?

Maybe it makes sense to consider investing in 2022, rather than to wait till next year…

With the Investment Deduction (ID), the Belgian authorities want to encourage SMEs to make productive investments. If your company does an investment, it can deduct the cost by way of a depreciation from its profits every year. Thanks to the ID, it can deduct an additional percentage of the purchase price of that investment on top of the annual depreciation.

Both companies and private individuals (sole proprietors) can claim the ID.

Until the end of 2022, your Belgian company can deduct an additional 25% of the investment price from this year’s taxable earnings. For example, if you do an investment of €20,000, this will result in an extra tax saving of €1,000 at a Corporate Income Tax (CIT) rate of 20% (€20,000 × 25% × 20%). The ID has been at 25% since March 2020, as a temporary measure due to the pandemic.

If your 2022 profits are too small or you have none, the ID for 2022 will not be lost, as it can be carried forward to 2023.

What type of investments are eligible for the ID?

Basically any depreciable tangible or intangible fixed asset can benefit from it. Some assets are excluded, like, for example, the purchase of land. The same for cars, light trucks and multi-purpose vehicles. That electric car you wanted to buy, can be depreciated, but it will not entitle you to any ID.

The ID only applies to new (not to used or second-hand) investments that you depreciate over a period of at least three years and that are used a 100% professionally. Mixed use investments (both professional and private use) cannot benefit from the ID. If you acquire a house or apartment and rent it out for residential use, it will not be eligible either. It will probably generate rental income, but it is not considered a ‘productive’ investment.

What would be the necessary steps to take before the end of 2022?

If your investment is still delivered in 2022, you are in any case entitled to the ID of 25%, even if payment is only made next year. But what if delivery is no longer possible in 2022, due to increased delivery times in our Post-COVID World?

Will it help in that case if your supplier issues an advance invoice before the year-end? Actually it will not. The fact that an invoice would still be drawn up in 2022 will not make any difference. A signed purchase order without delivery and/or payment, will not change anything either.

However, if you can accomplish that (part of) the price is paid already in 2022, you are entitled to the ID of 25% at least for that part. Your accountant would just need to properly process it as an ‘asset under construction or advance payment’ before 31 December 2022.

As from 1 January 2023, the ID rate will decrease from 25% to only 8%. If your company has investment plans, it is therefore best to execute them in 2022. On an investment of the same €20,000 you will only save €320 (SME CIT rate of 20%) or €400 (standard CIT rate of 25%) in 2023.

We need to add that the 8% ID rate applies to ‘standard’ investments. Higher percentages may apply in 2023 depending on the type of investment. For example, energy-saving investments give you a deduction of 13.5% and for investments in security it is 20.5%.

Perhaps now would be a good time to contact your accountant to check if it would make sense to proceed with your business investment in 2022…

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