You've just purchased a computer, vehicle, or machine for your business. You can't deduct this expense in full in the year of purchase; you must spread it over several fiscal years. This is precisely the role of depreciation. A central mechanism in French accounting, it determines both the accuracy of your financial statements, your taxable income, and your ability to optimize your tax situation. Yet, it remains poorly understood by many managers of very small and small businesses, who thus expose themselves to costly errors. This guide explains everything: definition, assets concerned, depreciation periods, calculation methods, accounting entries, and pitfalls to avoid.
Accounting depreciation: a simple definition
Accounting depreciation is the accounting recognition of the gradual loss of value of a business asset over time. When a company acquires equipment intended for long-term use in its operations (a computer, a vehicle, a machine, furniture), it cannot record the entire cost as an expense in the year of purchase. It must spread this cost over the period during which it will use the asset. Each annual portion thus allocated is called a depreciation charge. depreciation allowance.
The General Accounting Plan (PCG) provides a precise definition in its article 214-13: "The depreciation of an asset is the systematic allocation of its depreciable amount according to its use."
This distribution adheres to a fundamental accounting principle: the principle of independence of exercisesEach accounting period must include the expenses that are economically attributable to it. A vehicle used for five years generates a loss in value spread over those five years, not just in the first.
Depreciation is not an outflow of money. It is a statement of fact: it reflects an economic reality (the asset depreciates) without any flow of Treasury not occur at the time of writing.
What is the practical purpose of depreciation?
Depreciation pursues three cumulative objectives:
1. To present a true and fair view of the accounts. If a company were to fully expense a €25,000 vehicle in its first year, its profit would be artificially lowered that year, then artificially inflated in subsequent years while the vehicle continues to be used. Depreciation corrects this distortion.
2. Reduce taxable income. The annual depreciation allowance is a deductible expense from taxable profit. Over the entire period, the company deducts the full cost of the asset, spread over several fiscal years. For an asset costing €10,000 depreciated over 5 years with a corporate tax rate of 25%, the annual tax savings amount to €10,000 × 20% × 25% = € 500 per year, which amounts to €2,500 in total.
3. Monitor the actual value of the assets. In summary, the Net Book Value (NBV) The value of an asset corresponds to its original value less accumulated depreciation. It gives the company and its partners (banks, investors) a realistic measure of the productive capacity.
Essential vocabulary
Before going any further, here are the terms you will systematically encounter:
Which assets can be depreciated (and which cannot)?
Not all of a company's assets are depreciable. To be depreciable, an asset must meet three cumulative conditions:
Depreciable assets
Tangible fixed assets:
Intangible assets with a limited useful life:
Non-depreciable assets
Some assets do not depreciate with use or time: they cannot be amortized. In case of error, the tax authorities may challenge the deductions claimed.
| All right | reason |
|---|---|
| Fields | They do not wear out (except in quarries and deposits) |
| Goodwill (in principle) | Value not limited in time |
| Works of art | Value that can appreciate |
| Financial assets (securities, loans) | No depreciation through use |
| Stocks | Other accounting mechanisms are involved. |
The specific case of the €500 excluding VAT threshold. By way of tax tolerance (BOFiP, BIC-CHG-20-20), assets whose unit value is less than 500 € HT These items can be expensed directly in the year of purchase, without capitalization or depreciation. This rule applies to small office equipment, hand tools, and low-value computer accessories. It significantly simplifies accounting for very small businesses and SMEs.
Beware of SaaS subscriptions. A subscription to SaaS software (monthly or annual payment) is a recurring expense, not a fixed asset. Therefore, it is not depreciable. Only software purchased under a perpetual license, which creates a lasting asset, is subject to depreciation.
Typical depreciation periods by asset type
The depreciation period corresponds to the expected useful life of the asset within the company. It is governed by professional practices documented in the BOFiP (series BIC-AMT-10). The tax authorities cannot challenge a rate based on these useful lives.
| Kind of good | Permitted usage period | Possible method |
|---|---|---|
| Computer hardware (PC, server) | 3 years | Linear or decreasing (if new) |
| Software acquired | 1 to 3 year-olds | Linear |
| Professional mobile phone | 2 to 3 year-olds | Linear |
| Office furniture | 5 to 10 year-olds | Linear |
| Passenger vehicle | 4 to 5 year-olds | Linear only |
| Commercial vehicle | 4 to 5 year-olds | Linear or decreasing (if new) |
| Light industrial equipment | 5 to 10 year-olds | Linear or decreasing (if new) |
| Heavy industrial equipment | 10 to 15 year-olds | Linear or decreasing (if new) |
| Layouts and installations | 10 to 20 year-olds | Linear |
| Constructions (standard building) | 20 to 50 year-olds | Linear |
| Business assets (small businesses) | 10 years | Linear |
These durations are tax referencesThese are not absolute obligations. A company can choose a shorter duration if the actual use justifies it (intensive use, degrading environment, accelerated obsolescence), provided that it can be documented in the event of a tax audit.
When does depreciation begin? According to article 214-12 of the PCG, depreciation begins at the commissioning date of the asset, and not the invoice date. If you buy a machine on November 15th but only put it into service on January 3rd of the following year, depreciation begins in January.
Linear depreciation: calculation and numerical example
Straight-line depreciation is the standard method, applicable to all depreciable assets. It allocates the cost of the asset into constant annuities over the entire period of use. This is the simplest and most widely used method by very small businesses and SMEs.
The formula
The pro rata temporis
If the asset is put into service during the year, the first allocation is calculated at pro rata temporis, in days, on a 365-day basis:
In the final year, the allocation is also prorated to complete the depreciation.
Complete numerical example
Location: A small business buys a new utility vehicle on 1st July 2026 to 30 000 € HT. Determined usage period: 5 yearsAccounting period: calendar year (ending December 31).
Calculations:
Amortization schedule:
| Year | endowment | Accumulated depreciation | VNC end of fiscal year |
|---|---|---|---|
| 2026 | € 3 | € 3 | € 26 |
| 2027 | € 6 | € 9 | € 20 |
| 2028 | € 6 | € 15 | € 14 |
| 2029 | € 6 | € 21 | € 8 |
| 2030 | € 6 | € 27 | € 2 |
| 2031 | € 2 | € 30 | 0 € |
The net book value reaches zero at the end of the plan. The asset remains recorded on the balance sheet at its original value (€30,000) opposite the accumulated depreciation (€30,000), until its sale or disposal.
Declining balance depreciation: calculation and numerical example
Declining balance depreciation is an optional tax method provided for in Article 39 A of the French General Tax Code. It allows for the recognition of... higher endowments at the beginning of the property's life, then decreasing. The advantage: the company deducts more expenses in the first years, which reduces its tax sooner and improves its cash flow.
Conditions of eligibility
The sliding scale is reserved for new goods whose duration of use is at least 3 years oldbelonging to the categories listed in article 39 A of the CGI: industrial equipment and tools, computer equipment, utility vehicles, handling equipment, storage facilities, etc.
The following are expressly excluded:
Tax coefficients (Article 39 A of the French General Tax Code)
The decreasing rate is obtained by multiplying the linear rate by a legal coefficient, unchanged in 2026:
| Duration of use | Coefficient | Example: linear rate | Decreasing rate resulting |
|---|---|---|---|
| 3 or 4 years | 1,25 | 25% (4 years) | 31,25% |
| 5 or 6 years | 1,75 | 20% (5 years) | 35% |
| More than 6 years | 2,25 | 10% (10 years) | 22,5% |
source: BOFiP, BOI-BIC-AMT-20-20-20
The pro rata temporis on a decreasing scale
In a sliding scale, the pro rata temporis for the first year is calculated in whole months (and not in days as in linear time). The month of acquisition counts as a full month, regardless of the exact date within the month.
The rule of switching to linear
For each exercise, the company must compare:
As soon as (2) becomes greater than or equal to (1), we switch necessarily and definitively towards linear. This shift guarantees that the asset will be fully amortized at the end of its useful life.
Complete numerical example
Location: A small business acquires a new industrial machine on 1st January 2026 to 100 000 € HTDuration of use: 5 yearsAccounting period: calendar year.
Calculations:
Amortization schedule:
| Year | VNC start | Decreasing allocation (35%) | Residual linear allocation | Retained allocation | VNC end |
|---|---|---|---|---|---|
| 2026 | € 100 | € 35 | € 20 | € 35 (decreasing) | € 65 |
| 2027 | € 65 | € 22 | €14,083 (42,250/4) | € 22 (decreasing) | € 42 |
| 2028 | € 42 | € 14 | €14,083 (42,250/3) | € 14 (decreasing) | € 27 |
| 2029 | € 27 | € 9 | € 13 (27 462/2) | € 13 (linear flip-flop) | € 13 |
| 2030 | € 13 | € 4 | € 13 (13 731/1) | € 13 (linear) | 0 € |
The switchover occurs in 2029: the remaining linear allocation (€13,731) exceeds the decreasing allocation (€9,612). The linear allocation is used for the last two years.
Concrete tax advantage: With a corporate tax rate of 25%, the €35,000 allocation in 2026 generates a corporate tax saving of €8,750, compared to €5,000 with pure straight-line depreciation. That is €3,750 in cash reserves preserved from the first year on this single property.
Accounting depreciation vs. tax depreciation: the differences
Accounting depreciation and tax depreciation do not follow the same logic. Understanding how they work together is essential to avoid errors in your tax return.
Accounting depreciation: economic logic
Accounting depreciation aims to accurately reflect the actual consumption of economic benefits provided by the asset. It complies with the principles of the PCG: true and fair view, matching of expenses to revenues, independence of financial years.
The company has some discretion in determining the useful life, provided it justifies it. The chosen method (straight-line, declining balance, or variable) must reflect as closely as possible the actual rate of depreciation of the asset.
Tax depreciation: the logic of deductibility
Tax depreciation is governed by the rules of the General Tax Code (CGI). It sets the expenses deductible from taxable income, with minimum durations, authorized methods and specific ceilings (example: passenger vehicles are capped at €18,300 of depreciable base for recent acquisitions).
Frequent disagreements
| Situation | Accounting depreciation | Tax depreciation |
|---|---|---|
| Passenger vehicle priced at €30,000 | Amortized over 5 years on €30,000 | Capped at €18,300 base |
| Well amortized using the declining balance method for tax purposes / straight-line accounting method | Linear (true image) | Degressive (tax advantage) |
| Accounting period differs from tax period | Actual usage time | BOFiP usage period |
The exceptional depreciation: the reconciliation mechanism
When tax depreciation (often declining balance) differs from accounting depreciation (often straight-line), the difference is recorded in accelerated depreciation. It is a regulated provision recorded as a liability on the balance sheet (account 145), without economic significance, purely for tax purposes.
Endowment phase (first years, decreasing > linear): the difference is recorded as a debit to account 68725 (provision for exceptional depreciation) and as a credit to account 145.
Recovery phase (last years, linear > declining): the accelerated depreciation is gradually absorbed, to the debit of account 145 and to the credit of account 78725 (reversals on accelerated depreciation).
Accelerated depreciation must be tracked asset by asset and reported in the tax return (form 2058-A). Failure to do so during a tax audit may result in the deduction of the accelerated depreciation being disallowed.
How to account for depreciation (entries and balance sheet)
Recording depreciation is a year-end closing operation. It involves specific accounts from the General Chart of Accounts.
The accounts used
On the debit side (charges):
On the credit side (accumulated depreciation, subtractive asset):
Standard writing
Let's take the example of the €30,000 utility vehicle (full allowance of €6,000/year):
68112 – Depreciation expense (tangible fixed assets) 6,000.00
28182 – Depreciation of transport equipment 6,000.00
(Annual depreciation of commercial vehicle – invoice no. XXX, 5 years straight-line)
This writing has passed at the close of each financial yearEven in the absence or insufficiency of profit (Article 214-11 of the French General Accounting Plan), depreciation is mandatory: failure to record it permanently deprives the company of the corresponding tax deduction.
The impact on the balance sheet
In summary, fixed assets appear according to the following pattern:
| Active | Gross value | Accumulated depreciation | VNC |
|---|---|---|---|
| Commercial vehicle | € 30 | €9,025 (end of 2028) | € 20 |
The gross value is always recorded at its original cost. Accumulated depreciation is deducted. The net book value decreases each year until it reaches zero.
Upon disposal of the asset (transfer or disposal)
When an asset is sold or disposed of, it is removed from the balance sheet. The following are settled simultaneously:
If the sale price is higher than the net book value: capital gain, taxable. If the price is lower: capital loss, deductible.
Mistakes to avoid
Depreciation errors are among the most frequent during tax audits of very small businesses (TPEs) and small and medium-sized enterprises (SMEs). They can lead to penalties of at least 10%, or even more in cases of deliberate omission, along with late payment interest of 0,20% per month. According to redressementfiscal.com, a company that neglected to properly record its depreciation on a building lost the right to tax deductions on more than [amount missing]. 800 000 euros during an inspection.
Here are the most common mistakes to absolutely avoid.
To expense an asset that should be capitalized
This is a very common mistake. An asset with a unit value exceeding €500 (excluding VAT) and a useful life exceeding one fiscal year must be capitalized and depreciated, not expensed. Deducting the full cost of a €1,200 computer in one lump sum is an error that the tax authorities can correct.
Forget about pro rata temporis in the first year
The initial depreciation charge must be calculated proportionally to the number of days (straight-line) or months (declining balance) between the date of commissioning and the end of the fiscal year. Applying a full annual charge in the first year, regardless of the acquisition date, is a common mistake that distorts the entire depreciation schedule.
Applying the discount to a second-hand item
Declining balance depreciation is reserved for new goodsA used commercial vehicle or machine cannot benefit from this, even if it has been refurbished. This error is common and systematically detected during tax audits.
Not practicing minimum depreciation
Depreciation is compulsoryEven in the event of a loss, if you fail to record the depreciation expense for the current fiscal year, you permanently lose the right to this tax deduction. Depreciation that has been deferred or deemed deferred for more than seven years cannot be recovered.
Confusing amortization and depreciation
Depreciation is planned from the beginning according to a fixed period and method. The depreciation is recognized. punctually When an asset loses value unexpectedly (breakdown, accelerated obsolescence, market downturn). The two can occur simultaneously, but they are not interchangeable.
Omit the accelerated depreciation
When a company applies the declining balance method for tax purposes while maintaining straight-line accounting, it must record the accelerated depreciation (account 145). Failure to make this entry distorts the balance sheet and may lead to the tax deduction of the declining balance method being challenged, as the tax authorities will consider that the depreciation has not been "effectively recorded" within the meaning of Article 39 B of the French General Tax Code (CGI).
Do not update the amortization schedule
If the expected useful life of an asset changes significantly (early replacement, change of use), the depreciation schedule must be revised prospectively and the amendment mentioned in the appendix to the annual accounts. A plan fixed for a period that has become obsolete exposes the company to a tax audit.
FAQ: Your questions about depreciation
What is the difference between amortization and depreciation?
Depreciation reflects the loss of value predictable and systematic of an asset over its useful life: it is planned from the time of purchase according to a known method and duration. Depreciation reflects a loss of value unforeseen and observed on an ad hoc basis (damaged equipment, accelerated obsolescence, sustained decline in market value). Both reduce the net book value of the asset on the balance sheet, but they do not have the same accounting nature (French Accounting Standards, art. 214-13 for depreciation, art. 214-17 for impairment). They can be combined for the same asset.
Can the depreciation method be changed mid-stream?
In principle, no. The choice of depreciation method (straight-line or declining balance) is a irreversible management decisionThe depreciation is calculated on an asset-by-asset basis at the time of its initial recording. The only exception provided for by regulations is the automatic and mandatory switch from the declining balance method to the straight-line method at the end of the plan, when the remaining straight-line depreciation exceeds the declining balance depreciation. Any change in method outside of this framework must be justified by a significant change in the asset's economic situation and disclosed in the notes to the financial statements.
What happens if I resell an asset before the end of its depreciation plan?
The sale removes the asset from the balance sheet. You compare the sale price to the net book value (NBV) at the date of sale. If the price is higher than the NBV: capital gain from sale, taxable (in the short term, included in ordinary income). If the price is lower: capital loss, deductible. Accumulated depreciation remains. Note that if the asset was depreciated using the declining balance method, its net book value is lower than with straight-line depreciation, which mechanically increases the capital gain taxable upon disposal.
What impact does depreciation have on my cash flow?
The impact is indirect, but realDepreciation is a non-cash expense: no money leaves the company when it is recorded. However, the depreciation expense reduces taxable income, which in turn lowers corporate income tax (or personal income tax). For an asset worth €30,000 depreciated over 5 years with a corporate income tax rate of 25%, the annual tax savings are €30,000 × 20% × 25% = € 1i.e €7,500 over the total periodChoosing a sliding scale accelerates these savings in the first few years, without increasing the total amount.
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Main sources: [General Accounting Plan, articles 214-11 to 214-15 (Légifrance)](https://www.legifrance.gouv.fr) • [BOFiP, BIC-AMT series (bofip.impots.gouv.fr)](https://bofip.impots.gouv.fr) • [Article 39 A of the General Tax Code](https://www.legifrance.gouv.fr) • [Bpifrance Création, Depreciation sheet](https://bpifrance-creation.fr/encyclopedie/fiscalite-lentreprise/fiscalite-divers/amortissements)
