Renovating rented business premises: deduct or depreciate?
Written by Ilias Aarrass6 min read · Published on · Last reviewed on 
In short
A renovation that permanently improves rented business premises is a tenant's investment: you capitalise it and depreciate it over its useful life, but no longer than the expected rental period. Ordinary maintenance and items under 450 euros are deducted directly; you deduct the VAT if you have taxable turnover.
- Maintenance is deducted directly, an improvement is depreciated.
- The depreciation period is never longer than the expected rental period.
- Tenant's investments can count towards the investment deduction.
- Agree with the landlord in advance what happens when you leave.
If you rent a practice room, workshop, salon or office, you usually want to make it your own. You lay a floor, install a reception desk, have electrics installed or build a consulting room. The building is not yours, but the investment is. For tax purposes this is called a tenant's investment. You usually cannot deduct it in one go, but depreciate it over a number of years. This article explains over how long, when it is a direct expense after all and what to agree with the landlord.
Maintenance or investment?
The first distinction is whether you are maintaining something or adding something. Painting the walls, replacing a broken tap or replacing worn carpet with similar carpet is maintenance. You deduct those costs directly in the year you incur them.
If you add something new that lasts longer than a year and makes the space more suitable for your business, it is an investment. Think of a new layout, a treatment room with a water point, a fixed counter or extra circuits in the meter cupboard. You capitalise it on the balance sheet and depreciate it. Small items under 450 euros you may deduct directly; see capitalise or deduct directly.
| Expense | Treatment |
|---|---|
| Repainting walls | Maintenance, directly deductible |
| New vinyl floor in a bare space | Investment, depreciate |
| Partition wall for a consulting room | Investment, depreciate |
| Replacing a lamp | Maintenance, directly deductible |
Depreciating over the rental period
You depreciate a tenant's investment over the period in which you benefit from it. That is the economic life of what you install, but never longer than the expected rental period. If you have a five-year rental contract and renewal is unlikely, you depreciate over five years, even if the floor would technically last ten. If renewal is very likely, you may include that period.
You usually depreciate on a straight-line basis, an equal part each year; see straight-line or declining balance depreciation. Tenant's investments can also count towards the small-scale investment deduction, which gives an extra deduction in the year of the renovation.
Worked example: fitting out a salon
- Floor, walls and water points
- 15,000 euros excluding VAT
- Rental contract
- 5 years, renewal uncertain
- Depreciation per year
- 3,000 euros
- Plus KIA in the first year
- 28% of 15,000 = 4,200 euros
Result: In the first year you deduct 3,000 euros of depreciation plus 4,200 euros of investment deduction. In each of the four following years, 3,000 euros.
VAT
If you are a VAT entrepreneur with taxable turnover, you deduct the VAT on the renovation in one go in the return for the period of the invoice. If you have exempt turnover, as many care providers do, you deduct nothing and the VAT becomes part of the investment you depreciate. With mixed turnover you split it; see splitting taxable and exempt turnover.
Watch out for the adjustment rules: if your use changes in the following years, for example because you switch to exempt activities, part of the deducted VAT may have to be repaid. See VAT adjustment on investments.
Agreements with the landlord and leaving
Before the renovation, record in writing that the landlord agrees, who owns what you install and what happens when you leave. Do you have to restore the space to its original state, or can everything stay? Does the landlord pay compensation for what is left behind?
If you leave earlier than planned, you write off the remaining book value in one go in that year. If you receive compensation from the landlord or the new tenant, you offset it. More on renting in general is in renting business premises.
Frequently asked questions
Can I deduct a renovation of rented premises in one go?
Only if it is maintenance or each item stays under 450 euros. If the renovation adds something that lasts for years, you depreciate it over the rental period.
Over how many years do I depreciate?
Over the life of the investment, but no longer than the expected rental period including a likely renewal.
What if I leave early?
Then you write off the remaining book value in the year you leave, less any compensation you receive for the fittings.
Sources
- Small-scale investment deduction (KIA)Belastingdienst · belastingdienst.nl
- Costs you must deduct over several yearsBelastingdienst · belastingdienst.nl
Sources checked on
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
