Investitionsfreibeträge

Investitionsfreibeträge are tax relief measures that allow taxpayers to reduce their taxable income by amounts linked to investments in fixed assets. They are designed to support capital formation, modernization and policy goals by lowering the after-tax cost of investing.

In German tax law the most well-known example is the Investitionsabzugsbetrag (IAB) under § 7g EStG, which permits small and medium-sized enterprises to set aside a portion of planned investments in the next few years as a deductible expense. This reduces the current year’s tax burden. When the investment is made, the corresponding amount is typically deducted from the depreciation base of the asset; if the investment does not occur as planned, the amount may be added back to income. The program includes limits on eligible investments, profits and asset types, and thresholds can change with legislation.

Other countries or programs may offer similar Freibeträge or tax incentives, either as direct tax credits or as allowances for specific kinds of investments, such as environmental protection, energy efficiency, regional development or research. Common features are upfront or accelerated relief for investment activity and the requirement to meet defined conditions and maintain documentation.

Administration and effects: The relief is claimed in the annual tax return and supported by plans, purchase contracts and accounting records. It reduces current tax but can affect future depreciation or trigger recapture if conditions are not ultimately fulfilled. It remains subject to legal changes and audits.