In short and in plain language
This article explains how website costs count for tax.
A website invoice often has several parts. Build, domain, hosting and upkeep follow their own rules. Each item counts on its own.
A well-known rule of thumb is meant for things you can touch. A website often does not fit it. The domain has its own place.
For VAT, it depends on your business. The article does not replace advice. Ask your tax adviser about your case.
We list the items separately on our invoice.
The invoice for the new website is on the desk, and with it a question that the total amount cannot answer: which part reduces this year's profit, and which part spreads over several years? Plenty of online guides offer a quick answer - anything under 800 euros (EStG) can be written off at once, anything above gets depreciated, done. That rule of thumb comes from a provision whose wording applies to depreciable movable assets, and a website is neither movable nor physical. Applying it anyway means building an entry on a rule that does not address the case. This article assigns the items that appear on a typical website invoice to the provisions that actually govern them: business expenses under section 4 (4) (EStG), depreciation under section 7 (1) (EStG), the special position of the domain under section 4 (3) sentence 4 (EStG), and input VAT deduction under section 15 (1) (UStG). It does so descriptively. It does not replace tax advice for your individual case, and it cannot: whether an item is repair-type expenditure or production cost in your books depends on your facts, not on a blog article.
Key takeaways
- A website invoice is not a single item for tax purposes. Building the site, the domain, hosting and ongoing maintenance follow different rules - the classification is decided per line, not on the total.
- The 800 euro (EStG) threshold for low-value assets applies, according to the wording of section 6 (2) sentence 1, to depreciable movable business assets. The same requirement governs the collective item of 250 to 1,000 euros (EStG) under section 6 (2a).
- The official depreciation table for generally usable assets contains no entry for websites. The 3 years (AfA-Tabelle AV) listed there under item 6.14.3.2 cover workstations, personal computers, notebooks and their peripherals.
- The Federal Ministry of Finance circular of 22 February 2022 permits a useful life of one year (BMF-Schreiben 2022) for computer hardware and for operating and application software used for data entry and processing. The hardware list there is expressly exhaustive.
- The domain is an asset of its own with no wear and tear. Under cash-basis accounting, the acquisition cost of non-depreciable fixed assets only takes effect when the sale proceeds are received or the asset is withdrawn (EStG).
- The 19 percent (UStG) VAT on the invoice is a pass-through item for businesses entitled to deduct input VAT. Anyone using the small-business scheme under section 19 (UStG) pays it as a real cost.
Why a website invoice is not a single item for tax purposes
A website invoice normally lists several services side by side: designing and building the site, registering a domain, a hosting contract billed monthly or annually, and often a maintenance share for updates. These lines behave differently in tax terms because they describe different events. The starting point is the same for all of them: under the statutory definition in section 4 (4) (EStG), business expenses are the expenditures caused by the business. A commercially used website meets that condition without difficulty. The question is not whether the cost is deductible, but when it takes effect. That is where the paths separate - and that is the point most online summaries skip.
Building the site
If an independently usable intangible asset comes into being, the spread follows section 7 (1) (EStG). If the work maintains an existing site, the immediate deduction under section 4 (4) (EStG) applies.
Domain
Registration confers a right that does not wear out through the passage of time. For non-depreciable fixed assets, section 4 (3) sentence 4 (EStG) provides its own rule under cash-basis accounting.
Hosting and maintenance
Recurring fees for storage, updates and small adjustments are recurring expenditure of the respective year and therefore a business expense under section 4 (4) (EStG).
The practical consequence is mundane and still rarely drawn: an invoice that lumps everything into a single line reading "website" forces the bookkeeper into an estimate or a query. An invoice that separates building, domain, hosting and maintenance can be classified in minutes. Anyone currently comparing quotes should therefore look past the total - the article on fixed price versus hourly rate shows how differently the same work can be presented. And anyone who displays their own prices openly already knows the principle from the customer side: showing prices on your website describes the same effect for prospects.
Business expense, production cost, maintenance expenditure
Three concepts decide the timing. The first is the business expense: expenditure caused by the business reduces profit, says section 4 (4) (EStG). The second is production cost. Section 255 (2) sentence 1 (HGB) defines it as expenditure arising from the consumption of goods and the use of services for the production of an asset, its extension, or a substantial improvement going beyond its original condition. The third is maintenance expenditure - it preserves the existing condition instead of extending or substantially improving it, and therefore takes effect at once. Drawing the line between production and maintenance is the real point of contention for websites, because a site is rarely finished and rarely left untouched.
The difference between extension and maintenance
That hurdle is section 5 (2) (EStG): an asset item may only be recognised for intangible fixed assets if they were acquired for consideration. A business that keeps accrual accounts and has an agency build the site against an invoice has an acquisition for consideration. A business owner who assembles the site over their own evenings has no asset item under this provision - the running costs of creating it then take effect in the year they arise. This is no special route for websites but the general rule for self-created intangible value. If you are still weighing the two paths, website or builder compared covers the business side of the same decision.
Useful life: what the tables offer and what they do not
Once it is settled that a depreciable asset exists, section 7 (1) sentence 1 (EStG) spreads the acquisition or production cost evenly across the total period of use. Sentence 2 states what that spread is measured against: the customary useful life of the asset in the business. The statute names no figure for websites. It names only a single fixed period at all, namely 15 years (EStG) for the goodwill of a commercial business. And sentence 4 contains the twelfths rule: in the year of acquisition or production, the deductible amount is reduced by one twelfth (EStG) for each full month preceding the month of acquisition or production. A site completed in October therefore yields three twelfths in the first year.
Depreciation table AV
The official table for generally usable assets lists workstations, personal computers, notebooks and peripherals under 6.14.3.2 with 3 years (AfA-Tabelle AV). It contains no entry for websites or web applications.
A reference point, not a binding rule
The table's preliminary remarks describe the stated useful life as a reference point for assessing whether the depreciation claimed is appropriate (AfA-Tabelle AV). It is administrative practice, not statute.
Ministry circular 2022
For computer hardware and for operating and application software used for data entry and processing, a useful life of one year (BMF-Schreiben 2022) may be applied. The circular names ERP software and merchandise management systems as examples.
This article classifies, it does not advise
The domain is an asset of its own
Guides like to throw the domain in with the site and depreciate it along with everything else. The reason this does not hold lies in the nature of the right: a domain does not wear out through the passage of time. It does not lose value year by year the way a notebook does, and there is no technical wear on which a useful life could be anchored. Yet section 7 (1) sentence 1 (EStG) presupposes exactly that the use extends over a period of more than one year and that the cost is spread across the total period of use - a total period that does not exist here. The different treatment follows from that, and cash-basis accounting has a provision of its own for it.
- Acquiring an existing domain: under cash-basis accounting, the acquisition cost of non-depreciable fixed assets is only taken into account as a business expense when the sale proceeds are received or, in the case of withdrawal, at the time of withdrawal (EStG).
- Recurring domain fees: the annual fee paid to the registry is recurring expenditure and takes effect as a business expense in the year of payment (EStG).
- Mind the register requirement: section 4 (3) sentence 5 (EStG) requires non-depreciable assets to be entered into special, continuously maintained registers stating the date of acquisition and the acquisition or production cost.
- Separate registration from build: where both appear on one invoice, the domain line should carry its own amount - otherwise the split becomes a matter of interpretation after the fact.
Why the domain belongs on its own invoice line
Besides the tax classification, the domain carries obligations towards the registry. The registrant details have to be accurate and current - the article on DENIC obligations and registrant data sets out what follows from that. For bookkeeping, one point matters above all: the party to the registration contract and the holder of the asset should be the same person or company. If the domain runs privately while the website runs commercially, assigning the asset to business property becomes a matter of argument.
A further point concerns redirects from old addresses. A business reachable under two domains for years that gives one of them up loses more than visits: it has removed an asset from business property. On withdrawal, the same section 4 (3) sentence 4 (EStG) applies that had parked the acquisition cost until then. That is no cause for alarm, but it is a reason to document the surrender of a domain rather than letting it quietly lapse.
Where guides regularly overgeneralise
The most common missteps can be shown on the statutory text without any need for interpretation. It is enough to read the provision the claim relies on. The comparison below names the source in each case so that you can look it up yourself if in doubt - all the provisions mentioned are freely available in the consolidated editions published by the Federal Office of Justice.
| Common overgeneralisation | What the wording says | Source |
|---|---|---|
| A website under 800 euros is deductible at once | The valuation relief applies to depreciable movable fixed assets capable of independent use | Section 6 (2) sentence 1 EStG |
| Self-built sites are capitalised | An asset item may only be recognised for intangible fixed assets if they were acquired for consideration | Section 5 (2) EStG |
| Every website runs over three years | Depreciation is measured by the customary useful life of the asset in the business | Section 7 (1) sentence 2 EStG |
| The domain is depreciated with the site | Cost of non-depreciable fixed assets takes effect only on receipt of sale proceeds or on withdrawal | Section 4 (3) sentence 4 EStG |
| Holding an invoice is enough for input VAT | Exercising the input VAT deduction requires an invoice issued in accordance with sections 14 and 14a | Section 15 (1) sentence 1 no. 1 UStG |
The 800 euro (EStG) threshold is no phantom - it stands in the statute exactly like that. It simply refers to depreciable movable fixed assets capable of independent use. The collective item carries the same requirement: section 6 (2a) sentence 1 (EStG) allows it for assets worth more than 250 euros (EStG) but not more than 1,000 euros (EStG), and sentence 2 releases that item to profit by one fifth (EStG) in the year it is formed and in each of the following four years. That, too, presupposes movable assets. Transferring the 800 euros to a website means transferring a rule past a condition set out in the first sentence of the very same provision. Worth adding: assets worth more than 250 euros (EStG) must be entered into a special, continuously maintained register under section 6 (2) sentence 4.
For tax purposes a website is not an object but a bundle of items. Splitting the invoice the way the statute splits the items spares the bookkeeper the queries and spares you the estimate.
VAT: input tax deduction and the small-business scheme
The invoice carries 19 percent (UStG) VAT, because section 12 (1) (UStG) sets the standard rate for every taxable transaction at that figure. For a business entitled to deduct input VAT, that amount is not a cost but a pass-through item: section 15 (1) sentence 1 no. 1 (UStG) permits the deduction of the tax legally owed on supplies made by another business for the recipient's business. The sentence that follows is the one that trips people up in practice: exercising the deduction requires the business to hold an invoice issued in accordance with sections 14 and 14a. An order confirmation, a bank statement or a payment receipt will not do.
- Check the invoice before it goes into the file. If a mandatory detail under section 14 (UStG) is missing, the basis for the deduction is missing. A correction is possible, but it costs time and depends on someone spotting the error.
- Small-amount invoices follow their own rules. Section 33 sentence 1 (UStDV) provides a shortened list of mandatory details for invoices whose total does not exceed 250 euros (UStDV). That will rarely fit the build invoice, but it often fits individual hosting receipts.
- Factor in the small-business scheme. Under section 19 (1) sentence 1 (UStG), the turnover is exempt if total turnover did not exceed 25,000 euros (UStG) in the preceding calendar year and does not exceed 100,000 euros (UStG) in the current one. Anyone taxed on that basis has no input VAT deduction - the VAT on the website invoice then forms part of the acquisition cost.
- Keep to the retention periods. Section 14b (1) sentence 1 (UStG) requires invoices to be retained for eight years (UStG). Section 147 (3) sentence 1 (Abgabenordnung) is more granular: ten years (Abgabenordnung) for books and records, eight years (Abgabenordnung) for accounting vouchers, six years (Abgabenordnung) for the remaining documents.
For small businesses the gross amount is the price
What you can hand your tax adviser
In the end it is not the article that decides but the person preparing your accounts. Their work gets easier the more precise the documents are. The list below is not a booking instruction but a folder: if these details are on hand, the classification can be made without queries. That holds for the first site just as much as for later expansions - for instance when the company site grows into a small online shop or when a booking area for a holiday rental with direct bookings is added. Both are typical cases in which the extension-or-maintenance question genuinely has to be asked.
- An invoice with separate lines for build, domain, hosting and maintenance, each with its own amount and its own description of the service.
- The completion date, not just the invoice date. The twelfths rule in section 7 (1) sentence 4 (EStG) attaches to the month of acquisition or production.
- A short description of the scope for later work: was something replaced that already existed, or was an area added that did not exist before? That single line decides between maintenance and extension under section 255 (2) (HGB).
- Contract documents for the domain with registration date and registrant, for the register under section 4 (3) sentence 5 (EStG).
- Evidence of business use if the site also carries private content. Causation by the business is the basic requirement in section 4 (4) (EStG).
- Receipts for recurring services such as updates and backups. Why those items are not optional is set out in why website maintenance matters.
An honest classification
Sources and Studies
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