Accelerated Depreciation for SMEs: Growing Without Losing Tax Advantages

Under the Corporate Tax framework, Small and Medium-sized Enterprises (SMEs)—known in Spain as Empresas de Reducida Dimensión (ERD)—benefit from several incentives to boost their competitiveness. One of the most effective tools is accelerated depreciation, which optimizes company liquidity during the initial years of an asset's lifespan.

But what happens when a company succeeds and exceeds the turnover threshold? Today, we analyze this incentive and the "3-year safety net."

1. What is Accelerated Depreciation?

Companies with a turnover of less than €10 million can multiply the maximum straight-line depreciation rate (as per official Tax Agency tables) by 2.

This applies to:

• Tangible fixed assets (machinery, furniture, IT equipment).

• Investment property.

• Intangible assets.

Key Benefit: By depreciating assets faster, the taxable base is significantly reduced in the first few years, generating tax savings that improve immediate cash flow.

2. The €10 Million Limit

To be classified as an SME for tax purposes, the Net Turnover in the immediately preceding tax period must be less than €10 million.

If your company is part of a group of companies, this limit is calculated by adding the turnover of all group entities, regardless of whether they file consolidated accounts.

3. The "3-Year Rule": Safeguarding Growth

A major concern for business owners is losing these incentives just as the company starts billing over €10 million. Tax regulations provide a transitional period to prevent a sudden tax spike:

• The Condition: If the company met the SME requirements during the year it reached €10 million and in the two previous years.

• The Benefit: It may continue to apply SME tax incentives during the 3 tax periods immediately following the year the limit was exceeded.

By C.Fabri