Selected International Depreciation Rates by Asset and Country

Selected International Depreciation Rates by Asset and Country

Order Code RL33854
Selected International Depreciation Rates by
Asset and Country
January 30, 2007
Brent W. Mast
Information Research Specialist
Knowledge Services Group

Selected International Depreciation Rates
by Asset and Country
Summary
The depreciation provisions in the U.S. tax system are of recurring interest to
Congress. More than 100 bills were introduced in the 109th Congress that addressed
some aspect of depreciation. Concerns about the U.S. depreciation system tend to
begin with the criticism that updates to the system have not kept pace with
technological advancements of the assets for which it is utilized to account.
Proponents of updating the depreciation system point to a number of problems,
including inefficient investment incentives, high administrative costs, increased
disputes based on difficulties in compliance, and, in the macroeconomy, impaired
competitiveness and economic growth. New perspectives on the policy options for
the U.S. depreciation system may be gained through examining the systems used by
other countries. This report provides information on the depreciation systems of
selected European Union countries (France, Germany, Ireland, Spain, and the United
Kingdom) by presenting depreciation rates for buildings; computers; expensable
assets; motor vehicles; patents; plant, equipment, machinery, and tools; and software.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
List of Tables
Table 1. Asset Type: Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 2. Asset Type: Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 3. Asset Type: Expensable Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Table 4. Asset Type: Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table 5. Asset Type: Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Table 6. Asset Type: Plant, Equipment, Machinery, and Tools . . . . . . . . . . . . . . 9
Table 7. Asset Type: Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Selected International Depreciation Rates
by Asset and Country
Introduction
The depreciation provisions in the U.S. tax system are of recurring interest to
Congress. More than 100 bills were introduced in the 109th Congress that addressed
some aspect of depreciation. Depreciation, or capital cost recovery, provisions are,
“Income tax features intended to allow businesses to recover the costs associated
with the depreciation in value of tangible assets that are used to produce income.”1
Concerns about the U.S. depreciation system tend to begin with the criticism
that the depreciation system has not kept pace with technological advancements in
the assets for which it is utilized to account. Proponents of updating the depreciation
system point to a number of problems, including inefficient investment incentives,
high administrative costs, increased disputes based on difficulties in compliance, and,
in the macroeconomy, impaired competitiveness and economic growth. One policy
option is to alter the depreciable lives for classes of assets. Proposals that alter
depreciable lives include immediate depreciation of assets upon purchase (also
known as expensing an asset) and equalization of tax depreciation and economic
depreciation.2
New perspectives on the policy options for the U.S. depreciation system may be
gained through examining the systems used by other countries. The tables below
provide information on the depreciation systems of selected European Union
countries (France, Germany, Ireland, Spain, and the United Kingdom) by presenting
depreciation rates for buildings; computers; expensable assets; motor vehicles;
patents; plant, equipment, machinery, and tools; and software. All of the countries
represented use either straight line depreciation or a variation of accelerated
depreciation for the assets captured in the tables.3 The depreciation information for
each country was compiled from multiple commercially and publicly available
sources; the sources are named in each table. Within the sources, in certain instances
1 Joseph J. Cordes, Robert D. Ebel, and Jane G. Gravelle, eds., The Encyclopedia of
Taxation and Tax Policy, 2nd ed., Urban Institute Press (Washington: 2005), p. 43.
2 See the Senate Finance Subcommittee on Long-Term Growth and Debt Reduction hearing,
Updating Depreciable Lives: Is there Salvage Value in the Current System?, July 21, 2005.
Witness statements are available at [http://finance.senate.gov/sitepages/hearing072105.htm].
3 The Barron’s Dictionary of Accounting Terms, Third Edition (2000), defines straight-line
depreciation as a “method providing equal depreciation charges for each period because it
assumes constant benefit from the asset,” and accelerated depreciation as a “method
recognizing higher amounts of depreciation in the earlier years and lower amounts in the
later years of a fixed asset’s life.”

CRS-2
the information sought was not available, and in these instances the depreciation rates
are listed as “na.” In addition, please note that while the attempt was made to gather
the most current information available, no attempt was made to compare the
information offered in these sources to the laws of each country.
Because of the complex variations in the depreciation systems used by each
country, every nuance relevant to the depreciation allowances offered for each asset
type in every country was not captured. For example, a unique set of depreciation
rules may apply to those businesses operating within special geographic zones,
engaged in research and development, or purchasing “environmentally friendly”
equipment. Also, depreciation rules may vary depending on the size of the company.
Several notable variations in the depreciation systems studied were found in
Spain and the United Kingdom. In Spain, small and medium-sized companies,
defined as those with annual sales of less than 8 million, are entitled to increase by
a coefficient of 1.5 the maximum depreciation rates in the official tables for tangible
fixed assets and intangible assets (such as goodwill, trademarks and leasehold
assignment rights).4 In the United Kingdom,
If the company is medium-sized, a first-year allowance (FYA) of 40% of the cost
of an acquisition is given in the first year, and only in the following year will the
expenditure minus the FYA go into the pool and qualify for the writing-down
allowances (WDA). The same procedures apply for small businesses, except that
they enjoy an FYA of 50% for 2006/07. A medium-sized business must satisfy
at least two of the following conditions: turnover of not more than £22.8m per
year, assets of not more than £11.4m and no more than 250 employees. A small
business must meet two of the following conditions: turnover of not more than
£5.6m, assets of not more than £2.8m and no more than 50 employees.5
Also notable in the United Kingdom is that the depreciation system has been
replaced by what is termed a capital allowances system:
The system of capital allowances replaces the charge for depreciation in business
accounts by providing tax relief for certain types of capital expenditure which
can be written off against income profits in computing the taxable profits of a
business...The rates at which the various capital allowances are available bear
little or no relationship to the basis on which fixed assets are depreciated for
accounting purposes and usually a deferred tax provision will be created in the
accounts of a company to reflect the timing difference between depreciation for
tax purposes under the capital allowances system and depreciation for accounting
purposes...6
4 Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte
Country Guides: Spain, p. 16, at [http://www.deloittecountryguides.com/report_dl.asp?mode
=pdf&issue_id=729177658].
5 Ibid.
6 Barbara Ford, Ed., Doing Business in the United Kingdom, Part IV, Ch. 28. Matthew
Bender & Company, Inc. (2006).

CRS-3
An example of how the United Kingdom capital allowance system operates for
plant and machinery assets follows:
For example, capital allowances are given on the acquisition of plant and
machinery. Generally, all such expenditure in a tax year is taken to a single pool
(main pool), and at the end of the year a writing-down allowance (WDA) of an
amount equal to 25% of the pool is taken out of the pool and allowed as a
tax-deductible expense. The net amount in the pool is then carried forward to the
following year and the process repeated each year. Disposals of assets that had
previously gone into the pool are taken out at sale proceeds (but limited to
original cost). If there is a deficit in the pool at the end of a tax year, a balancing
charge arises that is included in taxable income.7
7 Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte
Country Guides: United Kingdom, p. 10, at [http://www.deloittecountryguides.com/report_
dl.asp?mode=pdf&issue_id=1350665920].

CRS-4
Table 1. Asset Type: Buildings
Elements of the Depreciation System
Countries
Basis
Method
Rate and Recovery Period
Commercial buildings at 2-5% per year;
Initial cost or cost of
Industrial buildings at 5% per year;
France
manufacturea
SLb
Recovery period for commercial buildings
(based on useful life) is 20-50 years.c
For SL, buildings at 2-4% per year; For AD,
buildings at 10% for each of first four years,
Historical, acquisition,
Germany
5% for each of next 3 years, and 2.5% for
or production costsd
SL, ADe
each of next 18 years, plus 1% of the
construction costs.e
4% per year for industrial buildings; 10%
Historical, acquisition,
per year for hotels, tourist facilities and
Ireland
or production costsf
SLg
buildings for farming and livestock
production.g
Industrial buildings at 1.4-3% per year;
Gasoline stations at 5% per year; Bank
Spain
Acquisition costh
SLi
buildings and dwelling houses at 2% (AD is
permitted for all assets except buildings and
furniture).j
United
Acquisition costk
SLl
Industrial buildings and hotel construction
Kingdom
expenditures at 4% per year.l
AD = Accelerated Depreciation
SL = Straight-Line Depreciation
Sources:
a. Lovells & Paul, Hastings, Janofsky & Walker (Europe) LLP, Doing Business in France, Ch 13, §13.02,
Matthew Bender & Company, Inc. (2005).
b. Price Waterhouse Coopers, Corporate Taxes: Worldwide Summaries, 2004-2005, John Wiley & Sons, Inc.
(Hoboken, NJ: 2004), p. 262.
c. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, France, §1 Tax Information,
Matthew Bender & Company, Inc. (2006).
d. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB WG), Annex
1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in Member States,
unpublished table. Obtained from the CCCTB WG on Feb. 15, 2006.
e. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, Germany, §1 Tax Information,
Matthew Bender & Company, Inc. (2006).
f. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB WG), Annex
1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in Member States,
Unpublished Table. Obtained from the CCCTB WG on Feb. 15, 2006.
g. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, Ireland, §1 Tax Information,
Matthew Bender & Company, Inc. (2006).
h. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB WG), Annex
1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in Member States,
unpublished table. Obtained from the CCCTB WG on Feb. 15, 2006.
i. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
Spain, p. 16, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&issue_id =729177658].
j. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, Spain, §1 Tax Information,
Matthew Bender & Company, Inc. (2006).
k. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
United Kingdom, p. 10, at [http://www.deloittecountryguides.com/report_dl.asp?mode
=pdf&issue_id=1350665920].
l. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, United Kingdom, §1 Tax
Information, Matthew Bender & Company, Inc. (2006).

CRS-5
Table 2. Asset Type: Computers
Elements of the Depreciation System
Countries
Basis
Method
Rate and Recovery Period
France
na
na
na
Historical, acquisition,
Germany
or production costsa
SLb
33.3%b
Ireland
na
na
na
For SL, 12.5%-25% per year; AD rate is
calculated using a coefficient of 1.5-2.5
Spain
Acquisition costc
SL, ADc
times the depreciation period, with the
minimum declining depreciation 11%.d
United
na
na
na
Kingdom
AD = Accelerated Depreciation
SL = Straight-Line Depreciation
na = Not Available From Our Sources
Sources:
a. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB WG), Annex
1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in Member States,
unpublished table. Obtained from the CCCTB WG on Feb. 15, 2006.
b. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
Germany, p. 19, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&
issue_id=1218285521].
c. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
Spain, p. 16, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&issue_id=729177658].
d. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, Spain, §1 Tax Information,
Matthew Bender & Company, Inc. (2006).

CRS-6
Table 3. Asset Type: Expensable Assets
Elements of the Depreciation System
Countries
Rate and Recovery
Basis
Method
Period
Software development expenses (may be
written off as incurred or amortized over
France
Expenseda
100% immediatelya
a maximum of 5 years); Computer
software costing less than 375a
Germany
Assets costing less than 410b
Expensedb
100% immediatelyb
Ireland
na
na
na
Spain
na
na
na
United
na
na
na
Kingdom
na = Not Available From Our Sources
Sources:
a. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
France, p. 18, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&issue_id=869325472].
b. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
Germany, p. 19, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&
issue_id=1218285521].

CRS-7
Table 4. Asset Type: Motor Vehicles
Elements of the Depreciation System
Countries
Basis
Method
Rate and Recovery Period
Initial cost or cost of
France
manufacturea
SLb
20-25% per year for 4-5 yearsb
16.6% per year for SL; AD rate may not
Historical, acquisition,
Germany
exceed twice the SL rate and must be less
or production costsc
SL, ADd
than 20%d
Ireland
Acquisition coste
SL, ADe
For SL, 12.5-20% per year; For AD, 40% for
cars used as taxis or for short term hiree
For SL, vehicles at 7.17-16% per year, and
trucks in construction, foundry, mining and
forestry activities at 8.33-15%; AD rate is
Spain
Acquisition costf
SL, ADg
calculated using a coefficient of 1.5-2.5
times the depreciation period, with the
minimum declining depreciation 11%h
25% per year for motor cars with a cost
greater than £12,000, with the allowance not
United
to exceed £3,000 per year; The £12,000 limit
Pooled costsi
ADj
Kingdom
is ignored for expenditure on the acquisition
or leasing of electric cars or cars with low
carbon dioxide emissions.j
AD = Accelerated Depreciation
SL = Straight-Line Depreciation
Sources:
a. Lovells & Paul, Hastings, Janofsky & Walker (Europe) LLP, Doing Business in France, Ch 13, §13.02,
Matthew Bender & Company, Inc. (2005).
b. Walter H. Diamond, Foreign Tax and Trade Briefs,Part 9 Western Europe, France, §1 Tax Information,
Matthew Bender & Company, Inc. (2006).
c. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB
WG), Annex 1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in
Member States, unpublished table. Obtained from the CCCTB WG on Feb. 15, 2006.
d. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country
Guides: Germany, p. 19, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&
issue_id=1218285521].
e. Patrick Ussher & Brian J. O’Connor, Eds, Doing Business in Ireland, Ch. 5, §5.03, Matthew
Bender & Company, Inc. (2005).
f. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB
WG), Annex 1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in
Member States, unpublished table. Obtained from the CCCTB WG on Feb. 15, 2006.
g. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country
Guides: Spain, p. 16, at [http://www.deloittecountryguides.com/report_dl.asp?
mode=pdf&issue_id=729177658].
h. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, Spain, §1 Tax
Information, Matthew Bender & Company, Inc. (2006).
i. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
United Kingdom, p. 10, at [http://www.deloittecountryguides.com/report_dl.asp?mode=
pdf&issue_id=1350665920].
j. Barbara Ford, Ed., Doing Business in the United Kingdom, Part IV, Ch. 28, Matthew Bender & Company, Inc.
(2006).

CRS-8
Table 5. Asset Type: Patents
Elements of the Depreciation System
Countries
Basis
Method
Rate and Recovery Period
Initial cost or cost of
France
manufacturea
SLa
20% per yeara
Germany
na
na
na
Equal installments over the
remaining validity of the
Ireland
Acquisition costb
SLb
patent, up to a maximum of
17 yearsb
Spain
na
na
na
United
na
na
na
Kingdom
SL = Straight-Line Depreciation
na = Not Available From Our Sources
Sources:
a. Lovells & Paul, Hastings, Janofsky & Walker (Europe) LLP, Doing Business in France, Ch 13, §13.02,
Matthew Bender & Company, Inc. (2005).
b. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, Ireland, §1 Tax Information,
Matthew Bender & Company, Inc. (2006).

CRS-9
Table 6. Asset Type: Plant, Equipment, Machinery, and Tools
Elements of the Depreciation System
Countries
Basis
Method
Rate and Recovery Period
For SL, 10-20% per year;b Most new
industrial equipment, machinery, trucks,
environmental protection systems, and
Initial cost or cost of
France
security devices are eligible to use AD (AD
manufacturea
SL, ADb
rate = straight line rate multiplied by a
coefficient fixed by statute);c Recovery
period, based on useful life, is 10-20 yearsd
Historical, acquisition,
Germany
or production costse
SL, ADf
6-10% per year for SL; AD rate may not
exceed twice the SL ratef
Ireland
Acquisition costg
SLg
10-20% per yearg
For SL, 7.14-15% per year; AD rate is
calculated using a coefficient of 1.5-2.5 times
Spain
Acquisition costh
SL, ADi
the depreciation period, with the minimum
declining depreciation at 11%i
United
Pooled costsj
ADk
25% per yearl
Kingdom
AD = Accelerated Depreciation
SL = Straight-Line Depreciation
Sources:
a. Lovells & Paul, Hastings, Janofsky & Walker (Europe) LLP, Doing Business in France, Ch 13, §13.02,
Matthew Bender & Company, Inc. (2005).
b. Walter H. Diamond, Foreign Tax and Trade Briefs,Part 9 Western Europe, France, §1 Tax Information, 2006.
Matthew Bender & Company, Inc. (2006).
c. Lovells & Paul, Hastings, Janofsky & Walker (Europe) LLP, Doing Business in France, Ch 13, §13.02,
Matthew Bender & Company, Inc. (2005).
d. Walter H. Diamond, Foreign Tax and Trade Briefs,Part 9 Western Europe, France, §1 Tax Information,
Matthew Bender & Company, Inc. (2006).
e. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB WG), Annex
1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in Member States,
unpublished table. Obtained from the CCCTB WG on Feb. 15, 2006.
f. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
Germany, p. 19, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&
issue_id=1218285521].
g. Patrick Ussher & Brian J. O’Connor, Eds, Doing Business in Ireland, Ch. 5, §5.03, Matthew Bender &
Company, Inc. (2005).
h. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB WG), Annex
1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in Member States,
unpublished table. Obtained from the CCCTB WG on Feb. 15, 2006.
i. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, Spain, §1 Tax Information,
Matthew Bender & Company, Inc. (2006).
j. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
United Kingdom, p. 10, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&
issue_id=1350665920].
k. Barbara Ford, Ed., Doing Business in the United Kingdom, Part IV, Ch. 28, Matthew Bender & Company, Inc.
(2006).
l. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
United Kingdom, p. 10, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&
issue_id=1350665920].

CRS-10
Table 7. Asset Type: Software
Elements of the Depreciation System
Countries
Basis
Method
Rate and Recovery Period
Software purchases may be
amortized over their
Initial cost or cost of
France
expected lives or in 12 equal
manufacturea
SLa
monthly installments starting
from the date of purchase.a
Germany
na
na
na
Historical, acquisition or
Ireland
productions costsb
SLb
Software over 7 yearsb
For SL, 7.14-15% per year;
AD rate is calculated using a
coefficient of 1.5-2.5 times
Spain
Acquisition costc
SL, ADc
the depreciation period, with
the minimum declining
depreciation at 11%.d
United
Pooled costse
ADe
Software at 25%f
Kingdom
AD = Accelerated Depreciation
SL = Straight-Line Depreciation
Sources:
a. Lovells & Paul, Hastings, Janofsky & Walker (Europe) LLP, Doing Business in France, Ch 13, §13.02.
Matthew Bender & Company, Inc. (2005).
b. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB WG), Annex
1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in Member States, unpublished
table. Obtained from the CCCTB WG on Feb. 15, 2006.
c. Deloitte Touche Tohmatsu in cooperation with the Economist Intelligence Unit, Deloitte Country Guides:
Spain, p. 16, at [http://www.deloittecountryguides.com/report_dl.asp?mode=pdf&issue_id=729177658].
d. Walter H. Diamond, Foreign Tax and Trade Briefs, Part 9 Western Europe, Spain, §1 Tax Information, Matthew
Bender & Company, Inc. (2006).
e. European Commission’s Common Consolidated Corporate Tax Base Working Group (CCCTB WG), Annex
1 - Draft Summary Tables of Main Tax Depreciation Rules for Fixed Assets in Member States, unpublished
table. Obtained from the CCCTB WG on Feb. 15, 2006.
f. Barbara Ford, Ed., Doing Business in the United Kingdom, Part IV, Ch. 28, Matthew Bender & Company, Inc.
(2006).