Depreciation of fixed assets is not a new concept, but the difference in determining the deductible depreciation expenses between tax law and accounting regulations, is a problem that confuses many enterprises.
According to accounting regulations, all existing fixed assets of the enterprise related to production and business activities (including acceptance but not used, unused or awaiting liquidation assets) must be depreciated and recorded as expense of the enterprise.
According to tax law, not all the depreciation expenses are included in the deductible expenses when determining corporate income tax (CIT).
Below are the depreciation expenses that will be considered as non-deductible expenses when calculating CIT under the regulations of Circular no. 96 in 2015:
- Depreciation expense for fixed assets not used for the production or trading of goods and services is not deducted when calculating CIT
+ Fixed assets serving workers at enterprises such as: motels, mid-shift cafeterias, garage…
+ Depreciation expense of fixed assets during the suspension period due to seasonal production for less than 9 months.
+ Depreciation expense of fixed assets temporary pause for repair, relocation, for periodic maintenance and maintenance, for a period of less than 12 months.
- Depreciation expense for undocumented fixed assets owned by the enterprise (except for financial lease-purchase fixed assets).
- Depreciation expenses for fixed assets that are not managed, monitored and recorded in the enterprise's accounting books according to the current regulations on fixed asset management and accounting.
- Depreciation in excess of the level currently prescribed by the Ministry of Finance (the current law is Circular no. 45/2013).
- Depreciation corresponding to historical cost in excess of VND 1.6 billion / vehicle for passenger cars with 9 seats or less. Minus: cars used for passenger transportation, tourist business.
- Depreciation and amortization of long-term land use rights (Land use rights for a definite term, if they have all invoices and vouchers and follow the procedures prescribed by law, participate in production and business activities, shall be gradually amortized into deductible expenses according to the permitted duration of land use is indicated in the certificate of land use rights (including cases of cessation of operations for repair or investment in new construction).
- Depreciation for works on land used for both production and business and for other purposes is not included in deductible expenses for the value of works on land corresponding to the unused area for production and business activities.
So, the difference in fixed asset depreciation between accounting regulations and tax law, how do we solve it?
There are two issues that need to be resolved, one is about recording in accounting, the other is about tax declaration.
+ In recording in accounting, we follow Accounting Standard No. 17, and guidance on deferred income tax accounting in Circular no. 200 in 2014.
+ In tax declaration, we only have to learn, update tax regulations and apply them in tax declaration. This is the only way.
