What are start-up costs?
Startup costs are business expenses incurred in the preparation of your enterprise. Substantiate that you made them with the intention of setting up a business. The Chamber of Commerce registration alone does not determine whether an expense is deductible. Private expenses remain excluded. See the official explanation of the start-up phase.
Deduct under 450 euros
An asset of less than €450 can generally be expensed immediately. Calculate without deductible VAT; non-deductible VAT is part of the costs. Ongoing business expenses do not become an investment based on their amount alone: an advisory invoice above €450 can also be a regular expense item.
From 450 euro depreciation
A durable business asset costing €450 or more and used for multiple years generally has to be depreciated. Spread the purchase value minus the residual value over its useful life, subject to the tax limits. Related components may form a single asset. See the example of a business laptop.
Deductible start-up costs for self-employed workers
Only expenses with a clear business character are tax-deductible. The expenses must be directly related to starting your business. They must be reasonable in amount and fit for your activities. You must be able to demonstrate what you incurred the expenses for. Therefore, good record-keeping is necessary. Determine per expenditure when and how it belongs in your records. Do not automatically include old expenses in full in the first financial year and do not deduct the same amount twice. They reduce your profit for the income tax.
What is not deductible?
Expenses of a private nature are not deductible. For expenses of a mixed nature, deduct only the business portion.
Examples:
- Private clothing and personal care.
- Living expenses such as groceries and housing costs.
- A driving licence or other private training.
- Expenses with no direct connection to your business.
Need receipt or invoice?
Keep invoices, receipts and the business reason. To deduct costs, you must substantiate the expense and the business connection; for VAT, specific invoice requirements also apply. If an invoice is missing, request a copy. Keep the records for the applicable retention period, usually seven years.
VAT on start-up costs and reclaim
VAT deduction may also be possible during the preparation phase. The purchase must be used for taxed activities and meet the invoice requirements. In the case of mixed use, only a portion may be deductible; the small businesses scheme (KOR) and exempt turnover can preclude deduction. Check the correct return period. Chamber of Commerce registration does not in itself confer the right to a refund. Non-deductible VAT forms part of the costs or acquisition value.
Input VAT
Input VAT is the VAT you pay on business expenses. You deduct this from the VAT you have to pay yourself. As a result, you pay less VAT on balance. If you cannot deduct VAT, the VAT remains part of your expenses. You process this correctly in your accounts.
Until when can you deduct start-up costs?
You may deduct expenses incurred in the years before you started. The expenses must be demonstrably intended for your business. You must be able to show that you were already preparing at that time. The further back the costs go, the stricter the assessment. Good substantiation is therefore necessary.
Start-up costs example
Example for full business use and deductible VAT: €300 excluding VAT for start-up advice can be a normal business expense. A laptop costing €1,200 excluding VAT that lasts for several years is generally depreciated. You assess the VAT separately in the correct period. A training course for a new profession is not automatically a business deduction.
Hours as start-up costs
During the start-up phase, you often spend considerable time on your business. You cannot deduct those hours as an expense in euros, but they can matter for tax schemes. Keep a clear record. Actual preparation hours within the same calendar year may count; hours from earlier calendar years do not carry forward. Maintain time records.
Hours criterion
You must devote a minimum of 1225 hours per year to your business to comply with the hours criterion. This applies to the full calendar year. Hours from the run-up phase also count. The number of hours is not adjusted in the event of a late start. You must be able to substantiate the hours; other conditions apply in addition to hours.
Deductions
The hours criterion does not automatically grant entitlement to all deductions. Check each regulation individually. Even without the standard hours criterion, business expense deductions and SME profit exemption can apply under their own conditions.
Process start-up costs in your accounts
Keep date and document, note the business purpose and determine whether it concerns ordinary expenses or a business asset. Establish the deductible VAT separately and check whether the amount has already been processed previously. Assets previously used for private purposes require their own valuation. If you would like help with that processing, view what is included in our bookkeeping package.
