Declining-balance depreciation in France: calculation and switch 2026

Declining balance depreciation (amortissement dégressif) is a French tax mechanism that concentrates asset write-off deductions on the first years of a business asset's life. The immediate effect: less corporation tax in the early years of ownership, a positive cash-flow advantage, and better alignment with the actual economic depreciation of many types of equipment. The regime is not freely available, however — the list of eligible assets is exhaustive, the mandatory switch to straight-line follows a precise legal rule, and a misclassification can trigger a tax audit adjustment.

This guide covers the complete mechanics with a five-year worked example, the switch-to-straight-line table, and the decision criteria for choosing between declining balance and straight-line.

The principle: declining-balance rate applied to net book value#

Unlike straight-line depreciation, which applies a fixed rate to the original cost, declining balance depreciation applies each year to the net book value (NBV) — that is, the original cost less accumulated depreciation. The base shrinks year by year while the rate stays constant, producing high deductions in early years and progressively smaller ones thereafter.

The declining-balance rate is obtained by multiplying the straight-line rate by a legal coefficient (CGI art. 39 A). The coefficient depends on the asset's normal useful life:

Coefficients unchanged by the Finance Act for 2026 (CGI art. 39 A).

Full worked example: new asset worth €100,000 ex-VAT, 5-year life#

A new asset acquired on 1 January Year N for €100,000 ex-VAT, normal useful life 5 years.

• Straight-line rate: 100 / 5 = 20%
• Applicable coefficient (5 years): 1.75
• Declining-balance rate: 20% × 1.75 = 35%

* Residual straight-line charge = opening NBV / number of remaining years including the current year.

Reading the table: the switch occurs in Year N+3, when the residual straight-line charge (€13,731) exceeds the declining-balance charge (€9,612). From that point, the remaining NBV is spread equally over the residual life — two years in this example.

With pure straight-line, the annual charge would be a constant €20,000 over five years. Over the first two years, the declining-balance advantage amounts to (35,000 − 20,000) + (22,750 − 20,000) = €17,750 of additional early deductions, deferred to the later years.

Time apportionment in the first year: whole months, not days#

An often-overlooked rule: under declining balance, the first-year time apportionment is calculated in whole calendar months. The month of acquisition counts as a full month regardless of the exact date. An asset purchased on 20 April is therefore depreciated over 9 months (April through December inclusive), i.e. 9/12 of the annual charge. Under straight-line, apportionment is to the day.

The exhaustive list under CGI art. 39 A#

Declining balance is not a free choice: it applies only to new assets with a normal useful life of at least 3 years that appear on the exhaustive list in CGI art. 39 A. The main eligible categories are:

• Industrial machinery and tooling used in manufacturing, processing, or transport
• Internal handling equipment (forklifts, pallet trucks, conveyors)
• Storage and warehousing installations
• Steam, heat, and energy-producing installations
• Medical equipment and installations
• Office equipment (excluding typewriters)
• IT equipment: servers, computers, network hardware, embedded systems
• Safety equipment and installations

For a broader overview of depreciation accounting, see our article on Depreciation allowance.

Key exclusions#

Several asset categories are expressly excluded. They represent a common area of tax adjustment because companies sometimes — incorrectly — apply the declining-balance method to them:

Our view: the exclusion of second-hand assets is frequently underestimated. Equipment bought as "refurbished" or "as new" does not regain eligibility. The condition of newness is assessed at the date of acquisition by the company, not the date of manufacture. Where there is any doubt about classification, the position must be documented before the depreciation schedule is drawn up.

The legal rule: mandatory, not optional#

The switch to straight-line is not a tactical choice — it is a mandatory legal requirement. Each financial year, the company must compare:

1. Declining-balance charge = opening NBV × declining-balance rate
2. Residual straight-line charge = opening NBV / remaining years (current year included)

As soon as (2) ≥ (1), the company must adopt (2) for the remainder of the depreciation period. It is not possible to stay in declining balance beyond that point, nor is it permissible to switch earlier in order to reduce charges.

When does the switch typically occur?#

The switch always falls in the second half of the asset's life. In the five-year example (35% rate), it occurs in Year N+3 — 60% through the asset's life. For a ten-year asset (22.5% rate), the switch typically occurs in Year 6 or 7.

Rule of thumb: the longer the useful life and the higher the coefficient, the later the switch occurs.

Common case: acquisition mid-year#

Where the asset is acquired during the year (pro-rata temporis applies), the residual straight-line calculation must account for the remaining whole years plus the initial fractional year. An error in this count can shift the switch by one year and alter the taxable bases accordingly.

The cash-flow vs accounting result trade-off#

Total depreciation over the asset's life is identical under both methods: 100% of original cost (less any residual value). What changes is the time profile of the deductions.

Our view: for a profitable SME financing equipment with a loan, declining balance is generally recommended. The corporation-tax saving in the early years contributes directly to loan repayment, creating a financial leverage effect. Conversely, for an early-stage startup already reporting losses, concentrating further charges on already-loss-making years delivers no immediate tax benefit and may weaken the accounts in the eyes of investors.

Regulatory depreciation (amortissement dérogatoire): when both methods coexist#

Under French accounting rules, economic depreciation (reflecting actual asset wear) is distinct from tax depreciation (following CGI rules). When a company adopts declining balance for an asset whose economic depreciation is straight-line, the excess of tax depreciation over economic depreciation must be recorded as amortissement dérogatoire (regulatory depreciation):

• Balance sheet account 145 — Amortissements dérogatoires (regulated provisions)
• Charge account 68725 — Dotations aux amortissements dérogatoires
• Reversal account 78725 — Reprises sur amortissements dérogatoires (in later years, when straight-line exceeds declining balance)

Regulatory depreciation is tax-deductible and appears in the tax return (form 2058-A). It must be tracked asset by asset.

Before recording an asset as declining balance in the depreciation schedule:

• Is the asset new (strict newness condition)?
• Is the normal useful life ≥ 3 years?
• Does the asset appear on the exhaustive list in CGI art. 39 A?
• Is the asset not a passenger vehicle, residential building, or non-hotel professional premises?
• Has the correct coefficient been identified (1.25 / 1.75 / 2.25) based on the chosen useful life?
• Has the whole-month pro-rata temporis been calculated for the first year?
• Has a multi-year switch table been prepared to identify the switch year?
• Has regulatory depreciation (account 145) been calculated if economic depreciation differs?
• Is all information correctly recorded in table 2056-A of the tax return?

Declining balance depreciation remains in 2026 a concrete tax lever for companies investing in eligible assets. Correctly applied, it generates a positive cash-flow deferral that profitable companies can reinvest or allocate to loan repayment. But the regime is tightly governed: exhaustive eligible-asset list, strict newness condition, mandatory switch mechanics, regulatory depreciation tracking.

The most common errors seen in practice are applying declining balance by default to unlisted assets, missing the switch to straight-line at the correct year, and failing to document asset qualification. These gaps are detectable during a tax audit and expose the company to additional tax assessments with penalties.

Updated 2026-05-26. This article is for information purposes and does not replace personalised advice. For your specific situation, consult a chartered accountant registered with the Ordre des experts-comptables.

This English section is written for international readers who need to apply the French guidance to a real management decision. The key point for the French declining-balance depreciation regime (amortissement dégressif) is not to memorise every technical rule, but to connect the rule to documents, deadlines, cash impact and governance. For finance teams optimising the fiscal deduction of qualifying equipment in French SMEs, 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 which assets qualify, what coefficient applies, and when the switch back to straight-line becomes mandatory. 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 eligibility list (CGI art. 39 A);
• coefficient mapping table;
• depreciation schedule;
• switch-back computation;
• year-end reconciliation memo;

Applying the declining method to non-eligible assets — vehicles, second-hand equipment, residential property — leads to mandatory reintegration of the excess deduction. 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.

How Hayot Expertise would frame the work#

In a professional review, the starting point is the business objective. Is the company trying to reduce risk, close the accounts, prepare a filing, obtain financing, retain employees, sell a business or improve reporting? Once the objective is clear, the technical analysis becomes more useful because it is attached to a concrete decision. Hayot Expertise would generally separate the work into three layers: compliance, numbers and management judgement.

The compliance layer answers whether a rule applies and which documents are required. The numbers layer measures the effect on profit, tax, payroll, cash, equity, valuation or working capital. The management layer decides whether the option is consistent with the company's strategy and risk appetite. This separation avoids a common mistake: treating a French technical rule as if it were only an administrative formality.

A fuller decision framework#

For a director who does not work daily with French accounting and tax rules, the safest framework is sequential. Start with the legal form and tax regime of the business. Then identify the income stream, expense, asset, employee benefit, transaction or reporting obligation concerned. Then test the accounting treatment, the tax treatment and the cash effect separately. Only after those three views are consistent should the company automate the process in accounting software or payroll.

This matters because French compliance is document-heavy. A bank feed, invoice, contract, payroll notice or tax form may each be correct on its own, while the overall file remains inconsistent. For example, the accounting entry may not match the tax return, the VAT position may not match the invoice wording, or the management report may not match the board minutes. English-speaking directors should therefore ask for a short reconciliation note whenever the amount is significant.

Questions to ask before closing the file#

• What is the exact French rule or accounting principle being applied?
• Which document proves the amount, date, counterparty and business purpose?
• Does the treatment affect VAT, corporate tax, income tax, payroll or social contributions?
• Is the cash impact immediate, deferred or only visible at sale, audit or financing?
• Who inside the company owns the update next year?

Why this improves SEO and real usefulness#

For an English reader, the value of this article is not a literal translation of the French version. It is the bridge between French terminology and management action. The content should help the reader understand what to verify, what to ask the accountant, and where the risk may sit in the financial statements or cash forecast. That is also the reason the English version keeps the French concepts visible while explaining them in operational language.

When to ask for help#

Professional input is useful when the topic changes the tax result, payroll cost, legal position, financing capacity, valuation or shareholder relationship. It is also useful when the company is growing quickly and the same decision will repeat every month. A small error in a one-off file is inconvenient; the same error embedded in a recurring workflow becomes expensive.