Horizon Europe Equipment Depreciation: Rules and How to Claim
Under Horizon Europe, you normally cannot charge the full purchase price of equipment to your grant. Instead, you claim depreciation costs: the portion of the asset's value that corresponds to its actual use on the action during the project. Equipment costs sit in cost category C.2, and depreciation is the default option for most Horizon Europe grants. It is calculated on the basis of costs actually incurred and written off in accordance with international accounting standards and your usual accounting practices (HE AGA, Article 6.2.C.2, p.97).
The consequences are concrete. A EUR 100,000 microscope used for two years of a four-year project, and shared 50% with other activities, will yield far less than EUR 100,000 in eligible costs. Only the depreciation attributable to the action and to the actual use rate is eligible. This single principle causes more confusion, and more rejected costs, than almost any other rule in the Annotated Grant Agreement (AGA).
This article covers what equipment depreciation includes, how to calculate it, the exceptions for low-value assets and equipment bought before the project started, and how to report it in your Individual Financial Statement. The rules below come from the Horizon Europe Annotated Grant Agreement (AGA), the authoritative interpretive guidance for beneficiaries.
What Is Equipment Depreciation in Horizon Europe?
Equipment depreciation is the cost model in cost category C.2 that lets you charge the gradual loss of value of an asset used for your action, rather than its full purchase price. It is the default option for most Horizon Europe grants, and it covers equipment, infrastructure, and other assets used for the action (HE AGA, Article 6.2.C.2, p.97).
Equipment costs (C.2) are one of the six Horizon Europe cost categories, alongside personnel, subcontracting, travel and subsistence, other goods and services, and indirect costs. For a broader overview of how these fit together, see the EMDESK Academy guide to Horizon Europe cost categories.
The depreciation category covers computers, laboratory machines, instruments, and other durable assets you need to deliver your objectives. For infrastructure, it can also include the costs necessary to make the asset ready for its intended use, such as site preparation, delivery and handling, and installation (HE AGA, Article 6.2.C.2, p.97).
One boundary matters here. If your organisation's usual practice is to treat durable equipment, or some of it, as an indirect cost, you cannot then declare it as a direct cost: it is already covered by the 25% flat rate for indirect costs under Article 6.2.E. Any depreciation you charge as a direct cost must genuinely be a direct cost under your own cost accounting practices (HE AGA, Article 6.2.C.2, p.97). A common mistake is charging depreciation twice, once inside overheads and once as a direct line.
The accounting standard behind depreciation matters too. The AGA requires that costs be written off in accordance with internationally recognised rules for maintaining books and reporting company accounts. It explicitly names IAS 16 (International Accounting Standards) and the International Financial Reporting Standards (IFRS) as examples (HE AGA, Article 6.2.C.2, p.97). If your organisation follows either framework, the depreciation method you use for your own accounts is the one you apply to the grant.
How Do You Calculate Equipment Depreciation Costs?
You calculate equipment depreciation by allocating the depreciable amount, the purchase price, systematically over the asset's useful life, then charging only the portion that corresponds to the actual use on the action during the reporting period. Depreciated costs can never exceed the equipment's purchase price (HE AGA, Article 6.2.C.2, section 1.4, p.98).
The AGA sets out clear principles for the calculation (HE AGA, Article 6.2.C.2, section 1.4, p.98):
- The depreciable amount (purchase price) of the equipment must be allocated on a systematic basis over its useful life, the period during which the equipment is expected to be usable. If useful life exceeds one year, you cannot charge the total cost of the item in a single year.
- Depreciation may normally be charged at the earliest from the moment the equipment is received and available for use, meaning it is in the location and condition to operate as intended.
- If you do not use the equipment exclusively for the action, only the portion used on the action may be charged, and the amount of use must be auditable.
The AGA gives a worked example worth committing to memory. A robot-supported piece of equipment was bought on 15 November and set up for use on 1 December. The reporting period and financial year both end on 31 December. The maximum depreciation the beneficiary may charge is one month (1 to 31 December), that is 1/12 of the annual depreciation, even if the accounts recorded a full year of depreciation at 31 December (HE AGA, Article 6.2.C.2, section 1.4, p.98).
'Useful life' is defined as the time during which the equipment is useful for the beneficiary. If you do not normally calculate depreciation, you may refer to national tax regulations to define it (HE AGA, Article 6.2.C.2, section 1.4, p.98). Declaring the full price in a single year would be treated either as non-compliant with international accounting standards or as an excessive cost, and therefore ineligible in both cases (HE AGA, Article 6.2.C.2, section 1.4, p.98). The only exceptions are the cash-based accounting specific case and low-value assets, both addressed below.
How Does the Actual-Use Rate Affect Your Claim?
The actual-use rate is the percentage of an asset's operating time that is genuinely dedicated to your action, and where the depreciation option applies, only that portion of the depreciation is eligible. If a machine is shared between your project and other activities, you must calculate, justify, and document the split (HE AGA, Article 6.2.C.2, section 1.4, p.98).
The AGA's clearest illustration involves a large 3D printer bought before the action started and not yet fully depreciated. For six months in reporting period 1 it was used 50% for the action and 50% for other activities. Linear depreciation under the beneficiary's usual practice is EUR 100,000 per year, so EUR 50,000 for six months. The eligible cost is EUR 50,000 multiplied by the 50% action-use rate, giving EUR 25,000 (HE AGA, Article 6.2.C.2, section 1.4, p.98).
This is where many teams lose funding. As the practitioner blog OnPoint notes, when you buy new equipment you can normally declare depreciation costs only, not the full invoice amount, and the same applies to equipment you already own. The Kronis compliance guide makes the same point: only the portion based on the depreciation cost during the period of use is eligible, and shared equipment requires a documented percentage.
The honest reality is that usage logs are tedious and often left until reporting time, which is exactly when the evidence gaps appear. If a machine is used for several projects, keep a running usage record from day one rather than reconstructing it before an audit.
What Are the Rules for Low-Value Assets and Equipment Bought Before the Project?
Two specific cases relax the depreciation-only rule: low-value assets can be charged in full in the year of purchase, and equipment bought before the action starts can still yield eligible depreciation for the remaining value. Both apply only where the depreciation option is activated in your grant (HE AGA, Article 6.2.C.2, p.97–98).
Cash-based accounting is one qualification. The AGA specifically addresses organisations that do not normally calculate depreciation. In that situation, declaring the full price in a single year counts either as non-compliant with international accounting standards or as an excessive cost, and therefore ineligible. If this applies to your organisation, refer to national tax regulations to define the useful life of the equipment (HE AGA, Article 6.2.C.2, section 1.4, p.98). This is a known challenge for smaller beneficiaries and newcomers to EU funding.
Prototypes are another. The AGA explicitly prohibits double charging of depreciation costs for a prototype or pilot plant against the grant or another EU grant (HE AGA, Article 6.2.C.2, p.97). If your project produces a prototype, confirm that no depreciation for that asset is being claimed twice across grants before submitting your financial statement.
Low-value assets charged in full
The full cost of a low-value asset may exceptionally be eligible in the year of purchase if all three conditions are met (HE AGA, Article 6.2.C.2, p.97–98):
- the full cost is recorded in your accounts as expenditure of that year, in line with your usual practices, and is NOT recorded as a depreciable asset;
- the cost is below the low-value ceiling defined under national law (for example national tax legislation) or another objective reference compatible with the materiality principle;
- the item is used exclusively for the action in the year of purchase.
If the item is not used exclusively for the action, only the portion used on the action may be charged. The University of Cambridge Research Services guidance shows how thresholds work in practice. Under its policy, equipment priced between GBP 5,000 and GBP 30,000 is treated as low value and its full price can be claimed if used exclusively for the grant, while items over GBP 30,000 must be depreciated. These figures reflect one institution's national thresholds, not an EU-wide ceiling. You must verify the applicable threshold under your own national legislation.
Equipment bought before the action starting date
Depreciation costs for equipment bought before the action started are eligible if they meet the general eligibility conditions of Article 6.1(a). The remaining depreciation, where the asset was not fully depreciated before the start, may be eligible for the portion corresponding to the action duration and the actual-use rate (HE AGA, Article 6.2.C.2, p.97–98). The 3D printer example above is exactly this case.
When Can You Charge Full Costs Instead of Depreciation?
Full cost for equipment is possible only when your grant activates the relevant option, either 'full cost only', 'depreciation and full cost for listed equipment', or 'full cost and depreciation for listed equipment'. Check Point 3 of your grant's Data Sheet to see which option applies to you (HE AGA, Article 6.2.C.2, p.98).
Horizon Europe defines several options in Article 6.2.C.2 of the Model Grant Agreement (HE AGA, Article 6, p.94):
| Option | What it means |
|---|---|
| Depreciation only | Default for most programmes. Equipment declared as depreciation for the action-use portion only. |
| Full cost only | Equipment purchased or developed specifically for the action may be declared as full capitalised costs. |
| Depreciation and full cost for listed equipment | Depreciation for all items, except specific items listed in the grant that can be charged at full cost. |
| Full cost and depreciation for listed equipment | Full cost for all items, except specific items listed in the grant that must use depreciation. |
Capitalised costs means costs recorded as assets on the beneficiary's balance sheet under a fixed asset account, in compliance with international accounting standards and your usual cost accounting practices. They may relate to full purchase costs and/or full development costs (HE AGA, Article 6.2.C.2, p.98).
Under the full cost option, purchase costs must still meet the general actual-cost conditions of Article 6.1(a) and the procurement rules of Article 6.2.C, meaning best value for money or lowest price, and no conflict of interest (HE AGA, Article 6.2.C.2, p.98). Equipment that does not meet the specific conditions for full cost, for example equipment bought before the action but used for it, must fall back to the normal depreciation cost (HE AGA, Article 6.2.C.2, p.98).
How Are Renting and Leasing Costs Treated?
Costs for renting or leasing equipment are eligible under both the depreciation and full cost options, but they must not exceed the depreciation cost of similar equipment and must not include any financing fees. This ceiling prevents leasing from becoming a route around the depreciation limits (HE AGA, Article 6.2.C.2, p.98).
The AGA sets out the calculation principles for rented or leased assets (HE AGA, Article 6.2.C.2, p.98):
- costs must correspond to the actual eligible costs incurred for the renting or leasing;
- they must not exceed the depreciation costs of similar equipment, infrastructure, or assets;
- they must exclude financing fees, such as finance charges in a lease or interest on loans taken to fund a purchase;
- there must be no double charging, for example no depreciation on equipment already funded at full cost by another EU grant.
The treatment then splits by option. Where the Grant Agreement provides for depreciation and the equipment is not used exclusively for the action, only the action-use portion may be charged, and use must be auditable. Where it provides for full cost, in principle the full rental or lease cost can be charged regardless of the use portion, but it still cannot exceed the depreciation of similar assets calculated over the action duration. If you sign a five-year lease at the start of a three-year action, you may only charge up to three years' worth of equivalent depreciation (HE AGA, Article 6.2.C.2, p.98).
How Do You Report Equipment Depreciation in the Financial Statement?
You report equipment depreciation as actual costs in your Individual Financial Statement (IFS) within the grant management system at each reporting period, entering the depreciation attributable to that period and the action-use rate. The duration of the reporting period directly feeds the depreciation calculation (Tutorial: Reporting Actual Costs, DEFIS.R.2).
Across EU actual-cost grants, each beneficiary reports eligible costs incurred during the reporting period in its IFS, and may report adjustments to previous periods. In some programmes such as the European Defence Fund (EDF), a supporting Detailed Cost Reporting Table (DCRT) is submitted alongside. The DCRT template is downloadable from the Funding and Tenders Portal (under Templates and Forms), and the reporting period duration is explicitly used in calculating personnel and equipment depreciation costs (Tutorial: Reporting Actual Costs, DEFIS.R.2). For the underlying cost category structure, the EDF cost categories tutorial is a useful reference.
A practical checklist before you report equipment depreciation:
- Confirm the equipment option in Point 3 of your grant Data Sheet: depreciation only, full cost only, or a listed-equipment variant.
- Record the full purchase price, the date the asset was available for use, and the depreciation schedule from your accounts.
- Maintain a usage log or asset overview showing the percentage of use on the action and the date it entered service.
- Apply the annual depreciation to the months in the reporting period, then multiply by the action-use rate.
- Check the two guardrails: cumulative depreciation cannot exceed the purchase price, and no cost may be double charged against another EU grant.
For lump sum grants, the mechanics differ. Under lump sum funding, there is no actual-cost reporting or financial ex-post audit: payment follows completion of work packages. But when you build the detailed budget table at proposal stage, your equipment estimates must still be an approximation of actual costs and meet the same eligibility rules, so the depreciation logic still shapes your figures.
What Does This Mean for Coordinators and Financial Managers?
The recurring theme is documentation. Because eligible equipment costs depend on purchase price, useful life, in-service date, and action-use rate, an audit will test all four. Build the evidence trail as you go rather than at reporting time.
Consider a partner who buys a EUR 120,000 spectrometer in Month 6 of a 48-month project, with a useful life of five years and 60% action use. Annual depreciation is EUR 24,000. Over the 42 remaining project months, that is EUR 84,000 of depreciation, of which 60% (EUR 50,400) is eligible as an illustrative calculation, assuming the machine was available for use from Month 6 and the usage log supports the 60% split. If the partner instead tried to claim the full EUR 120,000, the difference would be rejected at audit.
Practical steps that hold up under scrutiny:
- Create an asset register per beneficiary before the kick-off meeting, capturing purchase price, in-service date, useful life, and depreciation method from the accounts.
- Verify the equipment option in the Data Sheet at grant signature, and flag any listed-equipment items to the relevant partner immediately.
- Instruct partners to keep monthly usage logs for any shared asset, so the action-use rate is auditable rather than estimated.
- Cross-check that no asset treated as an indirect cost under a partner's accounting practice is also declared as a direct depreciation line.
- For any pre-existing equipment, confirm it was not already fully funded by another EU grant before charging depreciation.
The Commission's expansion of lump sum funding reduces some of this burden by removing actual-cost equipment reporting entirely for lump sum grants, as set out in the Lump Sum Funding guide (v3.0, June 2024). But for the large population of actual-cost Horizon Europe grants, depreciation remains the default. Mastering the four inputs, price, useful life, in-service date, and actual use, is the single most effective way to protect your equipment budget from audit adjustments.
Frequently Asked Questions
Can I claim the full purchase price of equipment in Horizon Europe?
Usually no. Under the default depreciation option, you can only claim the depreciation that corresponds to the actual use of the asset on the action during the project duration, and depreciated costs can never exceed the purchase price. Full cost is only possible if your grant activates the 'full cost only' or a listed-equipment option, shown in Point 3 of your Data Sheet (HE AGA, Article 6.2.C.2, p.98).
How is equipment depreciation calculated for a shared asset?
You apply the annual depreciation to the months in the reporting period, then multiply by the action-use rate. For example, a machine depreciating at EUR 100,000 per year, used for six months at 50% for the action, yields EUR 50,000 x 50% = EUR 25,000 eligible cost (HE AGA, Article 6.2.C.2, section 1.4, p.98). The usage split must be auditable.
Can I charge equipment bought before the project started?
Yes, if the depreciation option is activated and the general eligibility conditions of Article 6.1(a) are met. The remaining depreciation on an asset not yet fully written off may be eligible for the portion corresponding to the action duration and the actual-use rate (HE AGA, Article 6.2.C.2, p.97–98).
What is a low-value asset in Horizon Europe?
A low-value asset is an item whose full cost can exceptionally be charged in the year of purchase rather than depreciated, provided it is recorded as expenditure (not a depreciable asset), sits below the low-value ceiling defined under national law, and is used exclusively for the action that year (HE AGA, Article 6.2.C.2, p.97–98). Thresholds vary by country and institution.
Are leasing and renting costs eligible for equipment?
Yes, under both the depreciation and full cost options, but they must not exceed the depreciation cost of similar equipment and must exclude financing fees such as interest or finance charges. If you sign a five-year lease for a three-year action, you may only charge up to three years' equivalent depreciation (HE AGA, Article 6.2.C.2, p.98).
