If your IT company builds its own product, such as a SaaS platform or an app, your developers' hours cost money before the product earns anything. You may process those costs in two ways. You take them as costs straight away, or you put them on the balance sheet as an asset and write them off over the years the software lasts.
That second option is called capitalising. It makes your profit and your equity higher at first. But in a bv it also requires a legal reserve, which limits what you may pay out as dividend. For tax, separate rules apply again.
In short
- The law allows you to capitalise development costs. You write them off over the expected useful life, and only in exceptional cases over at most 10 years.
- A bv that capitalises development costs must hold a legal reserve equal to that amount. That part of equity may not be paid out as dividend.
- For tax you may write off the costs of self-made intangible assets in one go in the year itself. If you capitalise in the annual accounts, the profit in the accounts and the taxable profit differ.
In this article
- May you put the costs of your own software on the balance sheet?
- How do you write off capitalised software?
- What does the legal reserve mean for your dividend?
- What may you do with the costs of your own software for tax?
- Does this also apply to a sole proprietorship?
- What does your choice have to do with the WBSO and the innovation box?
- When is capitalising sensible, and when not?
May you put the costs of your own software on the balance sheet?
Yes. The law lists development costs as one of the intangible fixed assets that a legal entity shows separately on its balance sheet (Civil Code Book 2, article 365(1)). Intangible fixed assets are possessions without physical form that serve the business for more than a year, such as software, a brand or a licence.
It is a choice, not an obligation. The law refers to development costs to the extent that the legal entity capitalises them (Civil Code Book 2, article 365(2)). If you take them as costs straight away, that is also allowed. The law only mentions development costs. Research costs, where you are still exploring whether something is technically possible, are not included.
How you separate development from research and when you may start capitalising is worked out in Guideline 210 for annual reporting, on intangible fixed assets. That text is not freely available. So discuss that boundary with whoever prepares your annual accounts before you capitalise the first amount.
How do you write off capitalised software?
Over the expected useful life. The law says that capitalised development costs are written off according to the expected useful life. If in an exceptional case you cannot reliably estimate that useful life, you write off over at most 10 years (Civil Code Book 2, article 386(3)).
Software often ages faster than a building or a machine. So choose a useful life that matches how long the current version really lasts before you largely rewrite it. Depreciation must also be independent of the result. You may not write off more in a good year and less in a bad year (Civil Code Book 2, article 386(1)).
If the software goes out of use sooner, for example because you stop the product, you write off the rest in that year. An asset on the balance sheet that no longer earns anything does not give a true picture of your assets (Civil Code Book 2, article 362(1)).
What does the legal reserve mean for your dividend?
That you may not distribute part of your equity. If a legal entity capitalises development costs, it must explain them in the notes and hold a reserve equal to them (Civil Code Book 2, article 365(2)). That reserve is a legal reserve (Civil Code Book 2, article 373(4)).
The general meeting of a bv may only distribute profit to the extent that equity exceeds the reserves required by law or the articles of association (Civil Code Book 2, article 216(1)). In addition, the board only approves a distribution if the bv can keep paying its debts as they fall due afterwards (Civil Code Book 2, article 216(2)).
An example. Your bv has € 100,000 equity and has capitalised € 80,000 of development costs for its own platform. Then € 80,000 is fixed as a legal reserve. At most € 20,000 can still be distributed, and only if the bv can keep paying its bills afterwards. Every year you write off, the reserve becomes smaller and room is freed up again.
If a bv distributes too much and then can no longer pay its debts, the directors who knew or should have foreseen this are jointly and severally liable for the shortfall (Civil Code Book 2, article 216(3)). As owner-director you are usually that director. So keep track of the reserve before you pay out dividend.
What may you do with the costs of your own software for tax?
You may deduct them in one go in the year itself. The law says that the production costs of intangible assets can be written off in one go in the calendar year of production (Income Tax Act 2001, article 3.30(3)). Production costs are the costs of making it yourself, such as your developers' wage costs. For a bv the same rule applies through corporate income tax (Corporate Income Tax Act 1969, article 8(1)).
If you do not choose that, you write off for tax as with other business assets. The depreciation is then at most 20% of the production costs per year (Income Tax Act 2001, article 3.30(2)).
In this way a bv can capitalise in the annual accounts and still deduct everything straight away for tax. The profit in the accounts is then higher than the taxable profit in the first year, and lower in the years after. A small bv may also follow the tax principles in its annual accounts, if it does so for all items and states it in the notes (Civil Code Book 2, article 396(6)).
Does this also apply to a sole proprietorship?
The rules for the annual accounts and the legal reserve apply to legal entities, such as the bv. A sole proprietorship has no shareholders and pays no dividend, so the legal reserve plays no role there. The tax rule does apply: as a self-employed freelancer you may also deduct the costs of self-made software in the year itself (Income Tax Act 2001, article 3.30(3)).
For a sole proprietorship the production costs are mainly the costs you actually incur, such as hired help, licences and hosting. Your own hours are not costs, because you do not pay yourself a wage. Those hours do count for the WBSO R&D deduction, if you meet the conditions.
What does your choice have to do with the WBSO and the innovation box?
The WBSO reduces payroll tax on your developers' hours. That benefit is separate from whether you capitalise the costs. The innovation box does look at your costs. The benefits from your software must first exceed the production costs you have already deducted, before the low effective rate of 9% applies (Belastingdienst, innovation box).
So keep the costs per product separate, even if you deduct them straight away. Then you can later show which costs belong to which software. For the WBSO you already record hours per project, and you can use those records for this as well.
When is capitalising sensible, and when not?
Capitalising shows better what you have built. Your equity and your profit in the development years are higher, and that can help with a bank or a buyer who reads your annual accounts. Expensing straight away is simpler and more prudent, and there is then no legal reserve.
Research among listed software companies in the United States found that capitalised development costs were related to share prices and to later earnings. Investors turned out to undervalue companies that expensed all development costs straight away. The study found no support for the idea that the estimates involved in capitalising worsen the quality of the earnings figures (Aboody & Lev, 1998). That concerns large American companies under different rules, not small Dutch bvs.
For an owner-director the question is often practical. If you want to take dividend out of the bv in the coming years, the legal reserve limits that. If you want to show what the platform is worth, for example for financing or a sale, capitalising helps. Choose one approach and stick with it, because for tax and in the annual accounts you must work consistently (Income Tax Act 2001, article 3.25).
Sources
- Civil Code Book 2, articles 216, 362, 365, 373, 386 and 396, version in force from 1 July 2026. wetten.overheid.nl
- Income Tax Act 2001, articles 3.25 and 3.30, version in force on 31 October 2026. wetten.overheid.nl
- Corporate Income Tax Act 1969, article 8, version in force from 1 January 2026. wetten.overheid.nl
- Belastingdienst, Innovation box, accessed 31 October 2026. belastingdienst.nl
- Aboody, D. & Lev, B. (1998). The value relevance of intangibles: the case of software capitalization. Journal of Accounting Research, 36, 161-191. doi.org