Why some business costs are not fully deductible right away

This is a common misunderstanding. Not every business cost can be deducted in the year you pay it.

The key question is simple: Does this cost benefit only this year — or several years?

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1. Costs you can deduct immediately

If a cost relates to just one year, you can usually deduct it in full.

Typical examples:

• rent, utilities, salaries
• software subscriptions (for one year)
• materials and services used that year
• annual maintenance
• low‑value items (generally under €450)

These are your everyday business expenses.

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2. Costs you must spread over time

Some costs need to be deducted over multiple years. There are two common situations:

Investments (depreciation)

If you buy something you’ll use for several years (like a laptop or equipment), it’s an investment.

• goes on your balance sheet
• deducted gradually via depreciation

👉 Example: A €1,200 laptop → deductible, but spread over several years.

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Costs paid in advance

If you pay upfront for something covering multiple years, you split it into the years you actually use it.

👉 Example: You pay a yearly software subscription in December:

• December → this year’s cost
• rest → next year’s cost

Note: VAT (BTW) follows the invoice/payment date, not usage. So you can claim the full amount in Q4, December.

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Why this matters

Getting this right:

• makes your profit calculation more realistic;
• keeps you compliant;
• avoids surprises in tax reviews.

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Key takeaway

When in doubt, ask yourself:

1. Which year(s) does my business use this? (for income tax)
2. When was it invoiced? (for VAT)

Note, that due to these differences between cash flow and profit calculation, your profit will not be the same as your closing bank statement – even if you don’t have outstanding invoices and liabilities.
And also, you cannot ‘quickly’ lower your profit at the end of the year with a larger investment – if the cost is higher than the €450 threshold, which is mostly the case.

Frequently Asked Questions

General information, not tax advice. I am not a tax adviser (belastingadviseur); for your own situation, consider asking a qualified one.