Starting with the imposition regarding the year 2007, the allowance related to invested profits will be applied to all natural persons (proportionally in the case of co-propriety of private companies) who determine their profits with cash based accounting and who receive income from an entrepreneurial activity. According to a recent legal opinion, this allowance may be claimed also by members of supervisory boards, members of the board of management of foundations, executors, officials of associations, share holders-managers holding an essential share and physicians under certain circumstances.
The allowance accounts for 10% of the profits of a company up to a maximum of 100.000 euro a year. In years where losses are incurred, there is no right to claim the application of the allowance.
It has to be taken into account that it is necessary to invest in favoured assets such as material economic goods subject to depreciation with a normal period of use of four years and securities suited to cover insurances for severance payments and pensions. Also in this case the necessity to hold the securities for a period of four years is in place.
The allowance may not be claimed for buildings and investments by tenants, motor vehicles, aircraft, economic goods of low value (cost of production/acquisition up to 400 euro) when immediately deducted as expenditure, used economic goods, economic goods acquired from a company in which the taxpayer has a controlling holding and economic goods for which the application of the research and development allowance had been claimed.
If the material economic goods subject to depreciation are removed from the company within a period of four years, the allowance will be subject to subsequent taxation. In case of securities the subsequent taxation can be avoided if substitute acquisitions are made.
In order to be able to benefit from the allowance, together with the tax return, a claim for the application of the allowance has to be filed and a list of the favoured economic goods has to be annexed to the tax return.