What should be noted when depreciating fixed assets in the business?
Fixed assets are an important part of the business. So is it mandatory to register for depreciation of fixed assets? How is the time limit for submitting registration for the method of depreciation of fixed assets regulated? Following, Wacontre would like to send you the sharing related to some issues of fixed assets and depreciation of fixed assets in the business.
1.What is the depreciation of fixed assets?
Fixed assets are production materials that are specialized in production and business activities, have great value and are used by enterprises in many production periods.
Depreciation is understood as the systematic calculation, valuation and allocation of the value of fixed assets due to wear and tear after a period of use.
Depreciation of fixed assets in enterprises is the calculation and allocation of fixed asset value after a period of use due to wear and tear.
2.The meaning of depreciation of fixed assets
– Reasonable depreciation of fixed assets is a measure to help enterprises preserve their fixed capital.
– Through the reasonable depreciation of fixed assets, it is possible to help enterprises recover full fixed capital when the fixed assets expire.
– Besides, depreciation of fixed assets is also an important factor to determine the cost of products, evaluate business results,
Not only that, the calculation of depreciation of fixed assets is also the basis for calculating reinvestment and reproduction.
3.The latest regulations on registration of depreciation of fixed assets:
According to Clause 3, Clause 4, Article 13 of Circular No. 45/2013/TT-BTC guiding the method of depreciation of fixed assets:
“3. Enterprises shall decide for themselves the method of depreciation and amortization of fixed assets as prescribed in this Circular and notify the tax authorities directly managing them before starting to implement them.
4. The method of depreciation applicable to each fixed asset that the enterprise has selected and notified to the tax authority directly managing must be carried out consistently throughout the process of using fixed assets. In special cases where it is necessary to change the method of depreciation, the enterprise must clearly explain the change in the way of using fixed assets to bring economic benefits to the enterprise. Each fixed asset is only allowed to change once the method of depreciation during use and must notify in writing to the tax authority directly managing it."
According to Article 4 of Circular No. 96/2015/TT-BTC on CIT:
1. Except for expenses not deducted in Clause 2 of this Article, the enterprise may deduct all expenses if the following conditions are met:
a) Actual expenditures arising related to production and business activities of enterprises.
b) Expenditures with sufficient legal invoices and documents as prescribed by law.
c) Expenses if there are invoices for purchase of goods and services each time valued at VND 20 million or more (prices including VAT) when payment must have non-cash payment documents.
2. Expenditures not deducted when determining taxable income include:
2.2. Depreciation of fixed assets falls under one of the following cases:
The enterprise shall notify the method of depreciation of fixed assets that the enterprise chooses to apply to the tax authority directly managing before making depreciation.
(e.g., notification of selection for the implementation of the straight-line depreciation method…).
Annually, enterprises extract depreciation of fixed assets in accordance with the current regulations of the Ministry of Finance on the regime of management, use and depreciation of fixed assets including cases of rapid depreciation (if conditions are met)."
According to the Official Letter No. 803/TCT-CS dated March 13, 2019 of the General Department of Taxation:
"Based on the above provisions, in principle, enterprises must notify the method of depreciation of fixed assets that enterprises choose to apply to tax authorities directly managing before making depreciation. The determination of depreciation of fixed assets is deducted when determining income subject to CIT shall comply with the provisions on depreciation of fixed assets and the current CIT law."
– The time limit for submission of registration of the method of depreciation of fixed assets is: Before disclosing fixed assets, the enterprise must notify in writing to the Tax Department.
– The cost of depreciation of fixed assets shall be deducted if: The enterprise has registered the method of depreciation of fixed assets with the tax authority and complied with the above provisions (with invoices and full documents; Serving production and business activities; Make depreciation according to the prescribed framework,…)
Above, we have just shared with you the article on some issues of fixed assets and depreciation of fixed assets in the business.
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