When setting up a new company, or when carrying out day-to-day business, entrepreneurs incur various operating expenses. What should be done about small items of equipment and furniture? Is it possible to deduct VAT? Should these purchases be expensed or capitalized and depreciated? Here's everything you need to know about buying or renewing furniture for your small business.
VAT deduction on furniture purchases
Any company that collects VAT on its taxable sales or services can, in return, claim deductible VAT on its own operating expenses. This does not apply to the self-employed, particularly micro-entrepreneurs, who are exempt from VAT.
To exercise this right to deduct, the expenses must meet certain criteria, in particular :
- The small equipment or movables in question are purchased to meet strictly professional needs.
- The expense appears on an official receipt, usually an invoice.
- VAT is mentioned on this document, which is addressed in the name of the company.
- VAT has reached its due date for the supplier (delivery deadline, collection, customs clearance, etc.).
- Purchases do not involve products excluded from the VAT deduction scheme
VAT recovery is based on monthly or annual declarations, depending on the company's status: normal, mini-real or simplified real.
Expensing low-value equipment and materials
One of the main principles governing accounting is that goods intended for long-term preservation within the company should be recorded as fixed assets. However, if this rule were to be followed to the letter, even the smallest purchase of minor equipment or furniture would be subject to this procedure, which is unsuitable for small amounts. That's why the General Chart of Accounts (PCG) allows an exception for insignificant assets.
This means that these expenses will not appear on the assets side of the balance sheet, but will be expensed and included in the income statement for the year. The advantage of this is that the expenditure is expensed from the first year rather than being charged to fixed assets, which would then have an impact over several years.
The tax authorities' tolerance on the recognition of equipment and furniture as expenses is capped at a unit value of €500 excluding VAT and limited to certain types of goods, in particular :
- Small equipment and tools
- Office equipment and furniture
- Computer hardware and software
In practical terms, the tax allowance for office equipment and furniture generally concerns administrative supplies and other consumables. However, expenses for the acquisition of office "furnishings" are allowed to a certain extent when :
- Each piece of furniture has a unit value of less than €500 excluding VAT.
- The initial purchase or complete replacement of furniture must not exceed the €500 threshold.
Note that modular goods that can be purchased separately are still considered as a whole, and not in terms of the value of each individual component. This is the case, for example, with custom-made or self-assembly storage units.
The principle of asset accounting: fixed assets and depreciation
Moveable assets with a unit value in excess of €500 (excluding VAT) and all other assets required for business operations constitute a company's fixed assets. These assets are recorded as fixed assets in several categories:
- Tangible fixed assets (premises, land, equipment, tools, furniture, etc.)
- Intangible assets (licenses, patents, formation expenses, research and development costs, etc.)
- Financial assets (shares, securities, bonds, deposits, loans, guarantees, etc.)
Acquired assets lose value over time, whether through repeated use, technical obsolescence or economic criteria. This is taken into account in accounting through depreciation.
For furniture purchases in excess of €500, the depreciation schedule takes account of their value and useful life.
Some fixed assets do not lose value. This is the case for goodwill, for example. Other assets, such as financial fixed assets, cannot be depreciated. For the rest, the depreciation period is set to coincide with the useful life.
The tax authorities set the depreciation period for fixed assets according to the type of asset:
- 3 years for computers and software,
- 5 years for vehicles,
- between 5 and 10 years for machinery and tools,
- 10 years for furniture,
- between 20 and 50 years for buildings and constructions.