Component Depreciation in France 2026: Method, Accounting & Tax Optimisation
Component depreciation is mandatory under French GAAP (PCG). Learn how to split assets, apply the right useful lives, and reduce corporate tax in 2026.
Expert note: This article was written by our chartered accountancy firm. Information is current as of 2026. For a personalised review of your situation, contact us.
Updated April 2026 — Component depreciation (amortissement par composants) is a mandatory requirement under French Generally Accepted Accounting Principles (PCG — Plan Comptable Général, art. 214-9). Yet many French SMEs still apply global depreciation to complex assets, leaving significant corporate tax savings on the table. This guide explains the rules, the method and how to implement it correctly.
What Is Component Depreciation?#
Component depreciation requires companies to split a fixed asset into separate parts (components) whenever those parts have materially different useful lives or patterns of consumption of economic benefits. Each component is then depreciated independently on its own schedule.
This obligation is set out in article 214-9 of the Plan Comptable Général (ANC regulation 2014-03) and applies to all entities subject to full French GAAP.
Practical example: A factory building purchased for €1,000,000 cannot be depreciated as a single asset over 40 years. It must be split: structural shell (40 years), roof (20 years), facades (20 years), technical installations (10 years), interior fittings (10 years).
Which Assets Are Affected?#
The component method is mandatory (not optional) for any asset where components have:
- distinct useful lives; or
- different patterns of consumption of economic benefits.
In practice, affected assets include:
| Asset type | Typical components |
|---|---|
| Commercial / industrial buildings | Shell, roof, facades, MEP installations, fit-out |
| Heavy industrial equipment | Engine, chassis, peripherals |
| Ships and aircraft | Airframe, engines, avionics, interior |
| Complex tooling | Mechanical parts, electronic parts |
Homogeneous low-value assets (standard office equipment, small tools) do not require decomposition.
Step-by-Step Method#
Step 1 — Identify significant components#
A component is significant if it accounts for a non-negligible share of the total asset cost. There is no statutory threshold, but in practice components representing 5–10% or more of total cost are identified.
Step 2 — Assign a useful life to each component#
The useful life must reflect the economic reality for the specific entity, not an arbitrary fiscal life. The French tax authority (DGFiP, BOFiP BIC-AMT-20-40) publishes reference lives that serve as a safe harbour.
| Component (building example) | Typical useful life |
|---|---|
| Structural shell | 40–50 years |
| Roof | 20–25 years |
| Facades | 20–25 years |
| MEP installations (HVAC, electrical) | 10–15 years |
| Interior fit-out | 8–10 years |
Step 3 — Record depreciation separately#
Each component generates its own depreciation charge (compte 681x) and accumulated depreciation (compte 281x) in the French chart of accounts.
Step 4 — Account for component replacement#
When a component is replaced (e.g. new roof):
- Derecognise the replaced component (net book value written off);
- Capitalise the new component at its actual cost;
- Restart depreciation over the new component's useful life.
⚠️ Common mistake: Expensing component replacement as maintenance rather than capital expenditure. This overstates current-year deductions and understates the asset base.
Corporate Tax Treatment (IS)#
The DGFiP aligns its tax doctrine (BOFiP BIC-AMT-20-40) with the accounting rules:
- Depreciation charges calculated by component are tax-deductible provided the useful lives are consistent with normal economic use.
- If the accounting life is shorter than the reference fiscal life, the excess is added back to taxable income.
- If the accounting life equals or exceeds the fiscal reference, no add-back is required.
Accelerated (dérogatoire) depreciation remains available independently of the component method for eligible assets.
Worked Example: Industrial Building €800,000#
| Component | Value | Life | Annual charge |
|---|---|---|---|
| Structural shell | €480,000 | 40 yrs | €12,000 |
| Roof | €80,000 | 20 yrs | €4,000 |
| Facades | €80,000 | 20 yrs | €4,000 |
| MEP installations | €96,000 | 10 yrs | €9,600 |
| Interior fit-out | €64,000 | 8 yrs | €8,000 |
| Total | €800,000 | — | €37,600/yr |
Without decomposition (40-year straight line): €20,000/yr.
Additional annual deduction with component method: +€17,600, saving circa €4,400 in corporate tax per year at the 25% IS rate.
Five Most Common Mistakes#
- Not decomposing at all — depreciating a building globally over 40 years.
- Confusing components with spare parts or consumables.
- Failing to derecognise the old component when it is replaced.
- Applying unjustifiably short lives that trigger a tax add-back on audit.
- Not documenting the decomposition schedule — without evidence, the DGFiP may challenge the deductions.
Further Reading#
- General depreciation rules
- Declining-balance depreciation
- French corporate tax 2026
- Tax optimisation for companies
- Accounting & review services Paris
Frequently asked questions
Is component depreciation mandatory for micro-enterprises?+
No. It applies only to entities subject to full French GAAP (PCG). Micro-enterprises and sole traders under simplified regimes are not concerned.
Can we change method mid-year?+
Component depreciation is not an accounting policy choice — it is a mandatory standard. Failure to apply it constitutes an accounting error, correctable through a prior-year adjustment (compte 1068).
Does component depreciation create deferred taxes under IFRS?+
Yes. Differences between accounting and tax lives generate deferred tax liabilities under IAS 12.
What is the difference between component depreciation and unit-of-production depreciation?+
Unit-of-production depreciation allocates cost based on actual usage (kilometres, machine hours). Both methods can be combined: apply unit-of-production to each identified component.
What happens if the statutory auditor identifies missing component depreciation?+
The auditor may issue a qualified opinion if the omission results in a materially misleading balance sheet. They may also trigger the alert procedure (procédure d'alerte) if equity is materially affected.
English practical addendum#
This English section is written for international readers who need to apply the French guidance to a real management decision. The key point for component depreciation under French accounting rules is not to memorise every technical rule, but to connect the rule to documents, deadlines, cash impact and governance. For companies owning buildings, industrial equipment or assets with major replacement cycles, the right approach is to identify the decision to be made, collect reliable evidence, and only then choose the accounting, tax, payroll or legal treatment.
The practical decision is whether components should be separated to reflect real useful lives and support reliable tax and accounting treatment. That decision should be documented before the year-end close, financing discussion, payroll run, transaction signing or tax filing concerned by the topic. When the matter is material, the file should include who decided, which assumptions were used, and which professional advice was obtained.
Evidence to keep#
- asset invoices;
- technical breakdown;
- useful-life memo;
- fixed-asset register;
- tax depreciation reconciliation;
Component depreciation should be based on technical and accounting evidence, not on an artificial tax-only allocation. A clean file also helps the company answer questions from banks, investors, auditors, tax authorities, employees or buyers. It is usually cheaper to prepare that evidence during the process than to reconstruct it after a dispute, audit or urgent financing request.
Management checklist#
Before acting, management should run a short checklist. First, confirm that the entity, period and perimeter are correct. Second, compare the accounting treatment with the tax, payroll or legal consequence. Third, quantify the cash effect, because a technically valid option may still be unsuitable if it creates a short-term liquidity issue. Fourth, make sure the decision can be explained in plain English to a shareholder, lender, employee or buyer who is not familiar with French terminology.
For French subsidiaries of foreign groups, translation is also a control topic. A term that sounds familiar in English may not have the same legal meaning in France. The safer method is to keep the French source wording in the working file, then add a short English management note explaining the decision, the financial effect and the residual risk.
Article written by Samuel HAYOT
Chartered Accountant, registered with the Institute of Chartered Accountants.
Regulated French accounting and audit firm based in Paris 8, built to support companies across France with a digital and decision-oriented approach.
Sources
Official and operational sources cited for this page.
This topic is part of our service Bookkeeping in France | Review, close & tax filing
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