At the end of a website project there is an invoice, and with it a question that tends to get stuck between the filing cabinet and the tax adviser: does this amount reduce profit straight away, or does it move into fixed assets and work its way through several years? That is not a matter of taste. It follows from two sentences in German law. For tax purposes, an intangible fixed asset may only be recognised if it was acquired for consideration (EStG Section 5 subsection 2). Commercial law, by contrast, grants an option to capitalise with an explicit list of exceptions (HGB Section 248 subsection 2). Anyone who knows those two sentences has already set half the switch. This article works through a typical website invoice line by line. It is no substitute for tax advice – the treatment of an individual case belongs with your tax adviser.
Two routes, one decision
In accounting terms a website is not something you can touch. It is an intangible asset, and almost everything else follows from that. German tax law is narrow here: an intangible fixed asset may only be recognised if it was acquired for consideration (EStG Section 5 subsection 2). A firm that builds the site in house does not have an option, it has a prohibition – the cost stays an expense of the year in which it arises. A firm that commissions a provider and pays for the work has an acquisition and takes the other route. That fork is the heart of the topic, and it explains why two businesses with almost identical spending can end up with completely different bookings. What a project of this kind actually costs is set out in Website budget: planning one-off and ongoing costs.
Commercial law takes a different line. Self-created intangible fixed assets may be recognised on the balance sheet – an option to capitalise, not a duty, and expressly not for self-created brands, mastheads, publishing rights or customer lists (HGB Section 248 subsection 2). For a small firm that is usually theory: a business using the cash-basis profit calculation prepares no commercial balance sheet. Where a balance sheet is drawn up, the commercial and the tax balance sheet diverge at this point. Where the useful life of a self-created intangible asset cannot exceptionally be estimated reliably, commercial law prescribes scheduled write-downs over ten years (HGB Section 253 subsection 3).
Built in house or acquired for consideration
In practice the edge between the two routes is rarely clean. A typical project mixes commissioned work and own work: the provider builds structure, design and technology, the firm supplies text, photographs and prices. Only the part that was paid for counts for the booking. Your own working hours create neither acquisition cost nor a deductible expense – they simply do not appear in the profit calculation. That feels unfair, but the reason is sober: without payment there is no price against which a value could be measured. If you want the effort of your own team to be visible, show it in the project costing, not in the ledger. How a project splits over time, and where the in-house work really sits, is shown in Website project: timeline and duration.
Whether a balance sheet is required at all turns on two thresholds. A trade business must keep books once total turnover exceeds more than 800,000 euros in a calendar year, and likewise once trading profit exceeds 80,000 euros in a financial year (AO Section 141 subsection 1). Below those thresholds the cash-basis calculation remains available – but it is no free pass: the rules on the immediate write-off of low-value assets, on forming a pooled item and on depreciation apply unchanged and must be followed (EStG Section 4 subsection 3).
Scroll table sideways
| Line on the invoice | How it is usually treated | What that turns on |
|---|---|---|
| Concept, design and build by a provider | Acquisition cost of an intangible fixed asset | Recognition only on acquisition for consideration (EStG Section 5 subsection 2) |
| Your own hours for text, photographs and prices | No recognition and no expense from own work | Self-created intangibles stay out for tax (EStG Section 5 subsection 2) |
| Setup, data migration and briefing during the project | Incidental costs of the acquisition | Incidental costs count towards acquisition cost (HGB Section 255 subsection 1) |
| Buying or taking over a domain against payment | Non-depreciable fixed asset | Effective on sale or withdrawal only (EStG Section 4 subsection 3) |
| Hosting, maintenance, security updates | Running expense of the period | Use granted for a period of time (EStG Section 11 subsection 2) |
| Later extension by a whole new section | Subsequent acquisition cost | Subsequent cost counts as well (HGB Section 255 subsection 1) |
The table shows what matters: it is not the invoice as a whole that gets classified, but every line on it. That is why an itemised invoice is worth more than one with a single line. Asking your provider to split the figures into build, domain, running service and briefing spares your bookkeeping an estimate and spares you a question during a tax audit. What else marks a solid quotation is set out in Checking a website provider, contract and access; how XICflow splits its own services is published on the pricing page.
What belongs in acquisition cost
Acquisition cost is more than the figure on the largest line. It also covers the incidental costs and the subsequent acquisition costs (HGB Section 255 subsection 1). For a website project that means everything needed to bring the site into an operational state lands in the same pot as the build itself. It is, however, the rule an audit starts from when an invoice has been posted as a single expense. Splitting the lines from the outset is cleaner – the provider knows them anyway, because they were part of the costing.
- Concept, design and build. The main figure on the invoice, provided the work was commissioned and paid for.
- Migrating content from the old site. Moving text, images and redirects is part of reaching the operational state.
- Setup on the target system. Going live, certificate, redirects, first measurement – without these the site cannot be used.
- Later extensions. A whole new section is subsequent acquisition cost, not routine care (HGB Section 255 subsection 1).
- Not the running service. Hosting, updates and small text changes are expenses of the period in which they arise.
- Not the deductible input tax. Where input tax can be reclaimed, the VAT stays outside acquisition cost.
The split happens on the invoice, not afterwards
Useful life: three years, and what comes after
There is no official line labelled website. The closest reference point sits in the depreciation table for generally usable fixed assets: workstations, personal computers, notebooks and their peripherals are listed under item 6.14.3.2 at 3 years (Depreciation table AV, Federal Ministry of Finance). One line above, under item 6.14.3.1, mainframes are listed at 7 years (Depreciation table AV, Federal Ministry of Finance) – so the spread inside one product group is considerable. The table applies to all fixed assets acquired or produced after 31 December 2000 (Depreciation table AV, Federal Ministry of Finance). Three years is the common approach for a company website in practice; if you depart from it, put the reasoning in the project folder rather than searching for it during an audit.
In the year of acquisition the full annual amount is not written off. For every complete month preceding the month of acquisition the amount is reduced by one twelfth (EStG Section 7 subsection 1). A site that goes live in September therefore carries four twelfths of the annual write-off in its first year – a detail that regularly knocks cash planning off balance. At the other end of the scale sits goodwill: where a whole business including its website is taken over and the purchase price cannot be allocated to individual assets, the statutory useful life is 15 years (EStG Section 7 subsection 1). What a website is worth at handover is covered in Business succession: the handover value of a website.
Useful life is an estimate that needs a reason
Four reliefs that do not apply here
German tax law offers several investment reliefs that come up regularly in conversations with an adviser. The four set out here all hang on a single word a website does not satisfy: movable. A website is an intangible asset, not a movable thing – and that puts it outside the scope, however modest the price. This is the most common misconception on the topic, and it costs more than money once it surfaces in an audit.
Low-value assets
The immediate write-off runs up to 800 euros per asset, but only for depreciable movable fixed assets capable of independent use (EStG Section 6 subsection 2). Assets whose value exceeds 250 euros must also be entered in a separate, continuously maintained register (EStG Section 6 subsection 2). Neither has any bearing on a website.
Pooled item
The pooled item is open to assets between 250 and 1,000 euros, and here too only to movable ones (EStG Section 6 subsection 2a). It is released rigidly at one fifth in the year it is formed and in each of the following four financial years (EStG Section 6 subsection 2a).
Declining-balance depreciation
The declining annual amount may be at most three times the straight-line rate and must not exceed 30 percent (EStG Section 7 subsection 2). This provision also addresses movable assets and comes to nothing for a website.
Investment deduction
Up to 50 percent of expected acquisition cost can be pulled forward, expressly for depreciable movable fixed assets (EStG Section 7g subsection 1). The total is capped at 200,000 euros per business across the year of deduction and the three preceding years (EStG Section 7g subsection 1).
In practice that means a purchased website costing a few thousand euros can be neither written off at once as a low-value asset, nor placed in a pooled item, nor depreciated on a declining balance, nor pulled forward through an investment deduction. It is spread on a straight line across the estimated useful life, full stop. That is not a trick, it is a question of how the contract is built: a monthly service model produces different bookings than a one-off purchase. Which models exist and how they differ is set out in the comparison of routes to a website.
The domain follows its own rules
A domain is not an accessory to the website but an asset in its own right – and it does not wear out. A right that can be held without a time limit does not lose substance over the years, so it is not depreciated. Under the cash-basis calculation, the acquisition cost of a non-depreciable fixed asset is recognised as a business expense only when the sale proceeds are received, or on withdrawal at the time of withdrawal (EStG Section 4 subsection 3). A firm that buys a domain for a notable sum therefore does not post that sum in the year of payment; it carries it as a value until the domain leaves the business.
Ongoing registration fees are a separate matter. They are consideration for administering the domain in a given period and therefore an expense of that year – including when they sit inside a provider bundle. The difference between a purchased domain and a registered one only becomes visible once a four-figure sum appears on an invoice. What else needs settling around domains and business email is covered in Domain and business email: the basics.
Whoever is in the register decides the value
Running costs and the prepayment
Hosting, maintenance and security updates grant use for a period of time. They reduce profit in the period they are paid for and do not move into fixed assets. The law draws a line at long prepayments: where expenses for a grant of use are paid more than five years in advance, they must be spread evenly across the period the prepayment covers (EStG Section 11 subsection 2). Locking in a discount for ten years of hosting therefore costs the immediate deduction for nine tenths of the amount. Up to five years the payment date still governs – one of the few points where contract length touches the current year's tax directly.
- Hosting and operation. Billed monthly or annually, an expense of the period concerned.
- Maintenance and security updates. They preserve the existing state and create nothing new.
- Small text and image changes. Upkeep, not an additional asset.
- Domain registration fees. Consideration for the period, whether or not a domain was purchased.
- Certificates and mailboxes. Running costs with no connection to the build.
- Prepayments beyond five years. Must be spread (EStG Section 11 subsection 2).
VAT: input tax, adjustment, small business rule
German VAT on a website invoice runs at 19 percent of the taxable amount (UStG Section 12 subsection 1). For a business entitled to reclaim input tax it is a pass-through item; for a small business it is real cost. The deduction hangs on a formality: exercising the input tax deduction requires the trader to hold a proper invoice (UStG Section 15 subsection 1). Without it the VAT on the website is lost, even where the work was plainly delivered. Small businesses stay exempt as long as total turnover did not exceed 25,000 euros in the preceding calendar year and does not exceed 100,000 euros in the current one (UStG Section 19 subsection 1) – they therefore carry the VAT on the website themselves and budget with the gross figure.
If the use changes later, the input tax deduction can be reopened. Where the circumstances governing the original deduction change within five years of first use, an adjustment must be made for each calendar year of change (UStG Section 15a subsection 1). In practice that hits a business that later moves into the small business rule or takes up exempt turnover. For most website invoices there is relief elsewhere: where the input tax attributable to acquisition cost is below 1,000 euros, no adjustment is made at all (UStDV Section 44 subsection 1). Only above that threshold is the period worth a calendar entry.
- Small-amount invoice. An invoice not exceeding 250 euros in total needs only four mandatory details (UStDV Section 33) – domain and hosting documents often fall exactly into that window.
- Electronic invoicing. An electronic invoice qualifies only if it is issued, transmitted and received in a structured electronic format (UStG Section 14 subsection 1). A PDF does not meet that.
- Transitional rule. A trader with up to 800,000 euros of total turnover in the preceding calendar year may still bill on paper or in another electronic format for supplies made until 31 December 2027 (UStG Section 27 subsection 38).
- Net or gross. Where input tax is deductible, acquisition cost is the net figure; for a small business it is the gross figure.
The document outlives the website
A website gets replaced after a few years. The invoice for it stays in the building considerably longer. Accounting vouchers must be kept for eight years, books, records and financial statements for ten years, and other documents for six years (AO Section 147 subsection 3). Throwing out a website invoice after a relaunch, because the site is switched off anyway, destroys the evidence for a write-off that may still be examined. The folder holding the contract, the invoice, the scope of work and the note on the estimated useful life is the cheapest tool in this entire topic.
A booking stays open to challenge longer than many assume. The regular assessment period is four years (AO Section 169 subsection 2). Interest starts to run 15 months after the end of the calendar year in which the tax arose (AO Section 233a subsection 2), and from 1 January 2019 it runs at 0.15 percent per month, that is 1.8 percent per year (AO Section 238 subsection 1a). An invoice filed in the wrong place is therefore no disaster, but it does produce an avoidable back payment with a surcharge.
The most expensive line on a website invoice is the one nobody itemised.
What the business hands the tax adviser
The adviser decides the treatment, but can only do so as well as the paperwork allows. A lump-sum invoice without line items forces a query or the cautious option, and the cautious option is rarely the cheapest. Six things are enough to settle the question in a single pass.
- The itemised invoice. Build, domain, running service, briefing – shown separately.
- The contract or quotation. It shows whether a service was bought or only granted for use.
- The date the site became operational. The start of the write-off follows the month the site could be used, not the invoice date.
- The note on useful life. Two paragraphs of reasoning if you depart from the usual approach.
- Evidence for the domain. Registrant entry and amount, if the domain was taken over against payment.
- The list of in-house work. Not for the ledger, but for the project costing and the next negotiation.
With those six items in hand a discussion turns into an allocation. At XICflow the split is part of the quotation rather than an afterthought on request: build, domain and running service appear as separate lines with their own terms. The path from enquiry to a finished site is set out under how it works, the building blocks on the features page and results in the examples. Whether the step is worth taking at all is covered in When a new website pays off; if you are weighing a social media profile instead, the trade-off is in Your own website versus a social media profile. For firms that supply public buyers: Public sector contracts and what buyers check. And if you keep the site in a fixed routine afterwards, you spare yourself the next argument of principle: Website maintenance as a routine. Questions about a concrete split are answered via contact.
Sources and studies