Capital goods are essential for carrying out any activity. Let’s see together what they are, what amortization is and the concessions for the purchase.
Definition of what capital goods are
The definition of capital goods includes all those tangible and intangible assets (eg equipment, plants, trademarks, patents) that companies and professionals use to carry out their business. These are goods that are used for several years. For this reason, their accounting entry is made following the depreciation principle.
Amortization of the cost of goods
The amortization of the cost of capital goods consists in “spreading” the purchase cost of the asset over several years (or years). This means that whoever buys an instrumental good does not immediately deduct the entire cost incurred but only the portion relating to the year of use.
For example, if you buy a plant worth € 10,000.00, it will not be possible to deduct the entire amount in the first year but will have to be divided by the duration of the amortization (usually 5 years). Consequently, € 2,000.00 can be deducted for each year of use.
On the other hand, assets that do not have multi-year usefulness (non-instrumental) and assets that are only used and not purchased by the company or professional (e.g. leased, rented, or rented assets) are not depreciable.
The duration of the depreciation depends on the duration of use of the asset. This principle applies above all to the preparation of the financial statements (statutory depreciation). Tax legislation, on the other hand, provides for standard depreciation durations that depend on the company’s business sector and the type of asset purchased (depreciation coefficients). Only for assets with a value of less than € 516.46, it is possible to deduct the entire cost of the asset in the year of purchase (super-depreciation).
What are the capital goods and when they can be depreciated?
Capital goods can be divided into different categories according to the characteristics of the asset.
Mobile capital goods
The broadest category is that of capital movable goods. This includes motor vehicles, commercial and industrial vehicles (e.g. vans, trucks) as well as all the equipment and systems of a production company as well as office machines and furnishings (e.g. computers, smartphones, desks, cabinets). The tax amortization of these assets takes place in a few years (as a rule, within the first 10 years of use).
Real estate capital goods
Another category of capital goods is that of real estate (capital buildings). Sheds, warehouses, offices and shops fall into this category. These can be both buildings already built and buildings to be built. For this category of assets, the amortization period is generally very long (in some cases up to 50 years).
Intangible capital goods
The third category of capital goods is that of intangible assets (or intangible fixed assets). This category includes, in particular, trademarks, patents, rights to use intellectual property such as software and other intellectual property rights. For these assets, the duration of the amortization depends on the speed with which the asset loses value (eg the obsolescence of software) or on the duration of the right (eg duration of the license, duration of the patent).
Who can depreciate the assets?
Depreciation of capital goods can be done by companies (eg companies, sole proprietorships) and by professionals. These categories can deduct the cost of the purchased goods on the basis of the depreciation coefficients provided by the ministry. In this way, the taxable income for tax calculation purposes is reduced by the amount of the depreciation allowances.
For example, a company has a taxable income of € 10,000 and buys a machine worth € 5,000, which can be amortized over 5 years (€ 1,000 per year). This year the company can deduct the depreciation charge of € 1,000 from its income. As a result, the amount on which he will have to pay taxes (taxable income) is reduced to € 9,000.
The use of capital goods and depreciation follow different rules if the company or professional applies special or advantageous tax regimes, such as the flat-rate regime or the minimum regime.
Capital goods and flat-rate regime
In the flat rate scheme, there is no depreciation of assets and their cost is deducted from income in a different way. In this particular tax regime, in fact, the costs incurred by the company or professional are “flat rate”. There is therefore no exact deduction of the costs incurred, including those relating to depreciation. The calculation of the lump sum costs takes place as a percentage of the turnover, based on the type of activity carried out.
For example, a flat-rate retail trader may consider 60% of their turnover as a cost (whether they bought capital goods or not).
Capital goods in the minimum regime
L ‘ depreciation of assets instrumental is possible, however, in the system of minimum, according to the normal ministerial coefficients. However, in this particular tax regime, the entrepreneur and the professional cannot possess capital goods above a certain value threshold (currently set at € 20,000), under the penalty of forfeiture of the advantageous tax regime.
Concessions and incentives for the purchase of goods
The law provides for some incentives and concessions for certain categories of capital goods, in order to incentivize their purchase. An example is facilitation provided by the National Industry 4.0 Plan which concerns tangible and intangible assets connected to technological and digital transformation (eg advanced machinery, robots, software). For these types of assets, a reduced depreciation period (hyper-depreciation) is envisaged.
An example of an incentive for the purchase of capital goods is the one provided by the new Sabatini law which allows SMEs to access loans more easily. In particular, companies can request a contribution from the state on the interest on loans relating to the purchase of capital goods.