AfA

AfA, short for Absetzung für Abnutzung, is a tax concept used in German-speaking countries to allocate the cost of tangible fixed assets over their expected useful life. It allows businesses and landlords to deduct the asset’s depreciation from their taxable income as the asset wears out or becomes obsolete. AfA applies to physical assets such as machinery, equipment, vehicles, computers, and buildings used in business or rental activities. It does not apply to land and, in many cases, not to inventories or intangible assets, which are depreciated or amortized under different rules.

Depreciation methods under AfA include the linear (straight-line) method and the declining-balance method. The linear method assigns a constant amount of depreciation each year based on the asset’s useful life. The declining-balance method allows larger deductions in the early years of an asset’s life, with a gradual reduction over time; some jurisdictions permit switching from declining balance to linear depreciation once the switch would yield a more appropriate pattern of expense. The specific useful lives and depreciation rates are prescribed by tax law and depend on the asset class. In addition, small-value assets may be eligible for immediate expensing under a threshold rule (often referred to as “Geringwertige Wirtschaftsgüter” or GWG), rather than being depreciated over several years.

AfA affects the asset’s book value and tax base and requires appropriate accounting records. While the general principle is consistent, exact rates, thresholds, and procedures vary by country and over time, so taxpayers should consult current tax guidance or a professional adviser for applicable rules.