How is software depreciated in Germany – and does a one-year useful life apply?

Software depreciation: the one-year rule in German tax law

With its BMF circular (issued by the Federal Ministry of Finance) on the “useful life of computer hardware and software for data entry and processing,” Germany's tax authorities introduced a significant simplification: for fiscal years ending after December 31, 2020, the customary useful life of such software can be assumed to be one year. The original circular from 2021 was replaced in 2022 by a revised version that keeps the principle and clarifies the details.

It is not just classic office software that is covered. Operating and user software such as ERP systems, inventory management systems and other applications for business administration or process control are expressly named as well. Important: this is an option. You can use the one-year useful life, but you do not have to – for example, if spreading the cost over several years fits your profit planning better.

If you are searching for “software depreciation 2025” or “software depreciation 2026”: to the best of our knowledge (as of October 2026), the rule still applies. Before any larger investment, however, check whether new administrative guidance or changes in the law have been issued. Your tax advisor knows the current status and can apply it to your situation. For larger amounts in particular, this quick check is worthwhile.

Depreciating software under tax law and commercial law

The one-year rule concerns the determination of taxable profit. It does not apply automatically in the commercial balance sheet under the German Commercial Code (HGB): there, software that is part of fixed assets is depreciated systematically over the years in which it is expected to actually be used. For an ERP system or industry-specific software that stays in use for many years, this useful life can be significantly longer than one year.

For companies that prepare a balance sheet, this means that the commercial and tax balance sheets can diverge. That is permitted, but it creates reconciliation work and, for certain companies, can affect deferred taxes. Anyone who prepares a cash-basis income statement (Einnahmen-Überschuss-Rechnung) is generally not affected by this duplication, but must likewise distinguish cleanly between acquisitions and current expenses. There, too, the one-year rule is available as an option.

• Tax law: one-year useful life available as an option
• Commercial law: depreciation over the expected useful life
• Self-created software: option to capitalize under HGB, capitalization prohibited for tax purposes
• Cloud and SaaS fees: current expense, no depreciation

Purchased, commissioned or self-developed – what makes the difference

Purchased standard software with a perpetual license is a classic case of acquisition. Self-created software is different: for tax purposes, intangible fixed assets that were not acquired for consideration may not be capitalized, so development costs generally take effect immediately as a business expense. Under commercial law, by contrast, there is an option to capitalize internally generated intangible assets, subject to a restriction on distributions.

It gets more demanding with custom software that you commission from an agency. Whether it counts as acquired or self-produced depends, among other things, on who bears the economic risk of the development – for example, whether there is a contract for work (Werkvertrag) with an agreed result or billing on a time-and-effort basis. Your tax advisor should review this classification, ideally before the contract is signed.

As a software agency, we support this with a transparent breakdown: on request, we list concept, development, data migration, training and ongoing maintenance separately in the quote. That makes it easier for your tax firm to decide which item counts toward acquisition or production costs and which is booked as a current expense. At the same time, you keep track yourself of which portion is one-time and which is recurring.

Booking cloud costs: SKR03 and current expenses

With software as a service, you do not acquire a perpetual license; you pay for time-limited use. Such fees are therefore not depreciated but recorded as a business expense in the period concerned. For companies that prepare a balance sheet, annual subscriptions that extend beyond the balance sheet date may require a prepaid expense deferral so that the expense lands in the correct fiscal year.

If you search for “how to book cloud costs SKR03,” you will find different account suggestions in the SKR03, a standard chart of accounts widely used in Germany. In practice, SaaS fees are often booked to accounts for the time-limited transfer of rights such as licenses (SKR03 4964) or for maintenance costs of hardware and software (SKR03 4806), while permanently acquired software that counts as fixed assets goes to an account such as EDV software (SKR03 0027). The binding assignment is determined by your tax firm – what matters is consistent handling.

Booking Shopify costs: separating subscription, apps and fees

An online store on Shopify typically generates several types of costs: the monthly or annual plan fee, costs for apps and themes, payment and transaction fees, and possibly domain costs. For the search “how to book Shopify costs SKR03,” the principle is: plan and app fees are ongoing usage charges, while payment fees are often recorded as ancillary costs of payment transactions. It is important not to collect the different items in a single account.

Then there is value-added tax (VAT): if the provider of a service is based abroad, the reverse-charge mechanism can apply to services supplied to businesses – you then owe the VAT yourself and can deduct it as input VAT under the usual conditions. A theme purchased once may have to be treated differently from a subscription. That is why you should have your tax firm review the receipts regularly.

What depreciation means for your software investment

Tax rules should not be the sole factor in deciding between buying, subscribing and custom development. More important questions are: does the software fit your processes, how long do you want to use it, and what ongoing costs arise for operation, maintenance and further development? Depreciation mainly affects when the expense hits your profit – not whether the investment is worthwhile.

At Nano Concepts, we advise on software selection and develop custom software when standard solutions do not fit. For orientation: Starter projects start at €2,500, Professional projects from €8,000, and we calculate Enterprise projects individually. You will receive the exact quote after the free initial consultation – on request with a breakdown your tax advisor can use directly.

Note: This guide gives a general overview of principles as of October 2026 and does not replace tax advice. For your specific situation – legal form, method of profit determination, contract structure and size of the investment – please contact your tax advisor before you make any decisions. That is also where you will get a binding assessment of the useful life.