When are investment deduction amounts added back?

If the asset for which an investment deduction was made is purchased or manufactured within the 3-year investment period, the following applies (§ 7g para. 2 EStG):

• The investment deduction made for the purchased asset must now be added back to increase profit off-balance sheet. The addition amounts to 40 percent (until 2019) or 50 percent (from 2020) of the expected acquisition or production costs, but is limited to the deducted amount for the asset. The relevant details must be entered depending on the year in which the investment deduction was made.

• The actual acquisition or production costs of the asset are reduced to decrease profit by the previously claimed investment deduction. However, the reduction must not exceed the investment deduction. This reduction amount must be recorded in the accounts and entered in Lohnsteuer kompakt under "Business expenses > Depreciation" in the line "Reduction amounts according to § 7g para. 2 sentence 2 EStG".

Note: If investment deductions were considered in 2017, they must have been invested by 31.12.2020 at the latest - or they must be reversed and interest applied. In many cases, such an investment is now not possible as planned due to the Corona crisis.

To avoid these negative effects and to increase the liquidity of companies, the deadline for investment deductions, whose three-year investment period expires in 2020, is extended by one year to four years (§ 52 para. 16 EStG, inserted by the "Second Corona Tax Assistance Act" of 29.6.2020). This gives taxpayers who want to invest in 2020 but cannot due to the Corona crisis the opportunity to make the investment in 2021 without negative tax consequences (reversal, interest on the tax demand).

Currently, the investment periods according to § 7g EStG are being extended again: For investment deductions whose three-year or extended four-year investment period expires in 2021, the investment period is extended by one year to four or five years. This means: If the deduction was made in 2017 or 2018, the investment period now ends on 31.12.2022 (§ 52 para. 16 sentence 4 EStG, amended by the "Act to Modernise Corporate Tax Law").

The investment periods according to § 7g EStG are being extended again: If the three-year or already extended investment periods expire in 2022, they will be extended by another year to four, five or six years (§ 52 para. 16 sentences 3, 4 EStG, amended by the "Fourth Corona Tax Assistance Act" of 19.6.2022).