120% tax deduction on invoicing software: how does it work?
Switching to e-invoicing costs money — new software, perhaps a subscription. But the government has accounted for that. For those who invest in the right tools now, there is a tax benefit that few self-employed professionals are aware of: an enhanced tax deduction of 120% on invoicing software.
Here is what that means for you in concrete terms.
What is an enhanced tax deduction?
Normally, you can deduct business expenses at 100% from your taxable income. If you spend €500 on invoicing software, your taxable income decreases by €500.
With the enhanced 120% deduction, you can deduct that same €500 for €600. More deduction than you actually spent — that is the bonus the government provides to encourage the switch to digital invoicing.
Who qualifies?
The measure applies to self-employed professionals and small companies that take out a subscription to invoicing software. It specifically covers subscription-based plans — monthly or annual subscriptions, not one-off purchases.
The software must be compatible with the Peppol network for structured electronic invoicing.
The measure runs for income years 2024 through 2027. Those who start now can therefore benefit from this advantage for several more years.
What does it actually save you?
Suppose you pay €108 per year for an invoicing subscription (€9 per month).
Without the enhanced deduction: €108 deductible. With the 120% measure: €129.60 deductible.
The difference is €21.60 in additional deduction. Depending on your tax bracket, this translates into a small but real saving on your tax bill.
It may not sound spectacular, but it is a benefit on top of software you need anyway. And for those using a more expensive plan, the difference naturally adds up further.
Is there another tax benefit?
Yes. In addition to the enhanced cost deduction, there is also an enhanced investment deduction of 20% for one-off digital investments — i.e. if you purchase software outright rather than subscribe. However, for most self-employed professionals working with a monthly subscription, the 120% cost deduction is the relevant measure.
How do you apply it?
Simply keep the invoices for your software subscription. Your accountant processes the enhanced deduction in your tax return. You do not need to do anything special yourself — the only requirement is that the software is Peppol-compatible.
Not sure whether your current invoicing tool qualifies? Ask your accountant, or switch to software that is demonstrably Peppol-ready.
In summary
- Enhanced tax deduction of 120% on subscriptions to invoicing software
- Applies to self-employed professionals and small companies
- Applicable to income years 2024 through 2027
- Only for Peppol-compatible software
- No additional administration — your accountant handles it
Cleero is Peppol-ready and therefore fully eligible for this tax benefit. Start free and discover how much time and money you save.