Can a business claim a tax deduction for its computer? How is the deduction made?
In general, all costs that are deductible in the taxation of a business must be related to the acquisition of income.
If you purchase a laptop or other computer for your business (in this case as sole entrepreneur or "toiminimi" in Finnish), its use must be directly related to your work as an entrepreneur in some way.
In this case, you can deduct the purchase price in your taxes.
Note: This article (in Finnish) discusses the deduction of internet connection fees
The invoice for the purchase price of a computer or tablet must always be attached to the bookkeeping, either in paper or electronic form.
The invoice must be kept for 6 years from the year of purchase.
How does the personal use of a business computer affect the amount of the deduction?
The amount of the deduction for a business computer depends on how much you use the computer for work tasks. In this case, you may need to provide evidence.
When you use a computer in your business, the deduction for the computer is divided into three possible amounts of tax deductions:
- 0 % entitlement to deduction: You use the computer entirely for your own purposes that are not related to your business
- 50 % entitlement to deduction: You use the computer to some extent for tasks related to your business
- 100 % entitlement to deduction: You use the computer mainly for work or for acquiring significant side income
When you deduct the costs of purchasing a computer, you can also deduct the VAT portion of the fees you paid, in the same ratio as you deduct the entire price of the computer.
Example: You purchase a laptop computer for 800 euros (incl. VAT 24%), with a VAT-free price of 645.16 euros.
If the computer is mainly used for work, i.e. you use it for work more than half of the total usage, you can first deduct the amount of VAT with the VAT statement.
If the use of a computer for the business of a sole proprietorship is minimal, you can still claim a 50% deduction of the purchase price and value added tax on the computer in the tax assessment.
Any use is sufficient for a 50% tax deduction. Both in the profit and loss statement of a sole proprietorship and in the tax return, computer expenses are reported in the "other business expenses" section.
This is also where you would record many other regular expenses related to your sole proprietorship's business in your bookkeeping and tax assessment.
During the years 2020-2023, you can make a double depreciation of your company's most expensive computer in your tax return
The decisive factor in the way the cost of a computer is deducted in business tax is €1200 (from 2021).
If your business is VAT liable and the cost of the computer without VAT is €1200 or less, you can deduct the cost of the computer in full in the next tax return.
The VAT part of the cost of the computer is deducted in the next normal VAT return. If the cost of a computer for your business is over €1200, it is deducted in installments.
This is called residual expense depreciation.
This means that you deduct 25% of the VAT-exempt cost of the computer in the year of acquisition. In the following year, you again deduct 25% of the remaining amount.
What if you are an efficient user of computers and your business's computer breaks down every third year?
You can claim the full cost of the computer in your business's tax return if its expected economic lifespan is less than 3 years.
If you claim the full cost of a more expensive computer in one go, be prepared to explain to the tax authorities that the expected economic lifespan of the computer is no more than 3 years.
Summary of the computer deduction
- In general, business expenses that are related to the acquisition of income are deductible in business taxation
- If you purchase a computer for your business, it must be directly related to your work as an entrepreneur
- You can claim the purchase price as a tax deduction
- The amount of the deduction depends on how much you use the computer for work tasks
- 0% deduction if used entirely for personal purposes not related to business
- 50% deduction if used for some business tasks
- 100% deduction if used mainly for work or for significant side income
- You can also claim a deduction for the VAT portion of the fees paid
- If the cost is over €1200, it is deducted in installments
- If the computer's expected economic lifespan is less than 3 years, you can claim the full cost in one go
Are you a small business owner struggling with bookkeeping and tax deductions?
Our bookkeeping service can help you to manage your finances and claim tax deductions for your business expenses, including the cost of your computer.
Contact us for bookkeeping, tax advice, and consulting for your small business
- Email: hullumaksaa@gmail.com
- Phone: 044 547 2232 / Ari S
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