Tax Alert, December 2019
Rulebook on tax depreciation of fixed assets
On 23 December 2019 Minister of Finance has adopted Rulebook on tax depreciation of fixed assets (hereinafter: “Rulebook”), published in “Official Gazette of RS”, No.93/19 as of 26 December 2019. Rulebook will come into force on 1 January 2020, and is applicable on the assets acquired as from 1 January 2019, i.e. starting from the first day of tax period which begins in 2019.
For assets acquired until 31 December 2018, i.e. until the last day of tax period which begins in 2018, but activated after 1 January 2019 (i.e. after first day of tax period which begins in 2019), tax depreciation is to be determined in accordance with the existing rulebook - Rulebook on classification of fixed assets by groups for tax depreciation purposes (“Official Gazette of RS”, No. 116/04, 99/10, 104/18 and 8/19).
Pursuant to the Rulebook, fixed assets which are subject to tax depreciation are classified into groups, and depreciated by applying prescribed rates (I group – 2.5%, II group - 10%, III group - 15% IV group – 20% V group – 30%).
Tax depreciation is determined using linear method, proportionately to the number of days during the tax period in which asset has been in use, for each asset separately, on the basis of the acquisition value of the asset, i.e. value at which it has initially been recognized, in accordance with accounting regulation and IAS, i.e. IFRS and IFRS for SME (hereinafter: “accounting regulation”). Acquisition value cannot be changed during the tax period, unless in case of subsequent investments that are, in accordance with the accounting regulation, added to the acquisition value.
In case that accounting depreciation is lower than tax depreciation, only the amount equal to the accounting depreciation will be tax deductible..
Total depreciation determined for each asset separately, can be deductible up to the amount of acquisition value of that asset, increased by subsequent investments, if any.
Tax depreciation calculation start and ends simultaneously with accounting depreciation.
If, during the tax period, fixed asset is disposed or destroyed, the difference between net tax value (acquisition price increased by subsequent investments and reduced by tax depreciation) and net accounting value determined in tax period when depreciation stops is a tax deductible expense – the difference is however reduced by the amount of impairment deductible in the same tax period.
For intangible assets (concessions, patents, trade and service marks, models, licences, franchises and other intangible assets) amount of accounting depreciation is used as a tax deductible tax depreciation. Tax depreciation of fixed assets used under long-term lease agreement, which are, in accordance with accounting regulation, recognized as assets in books of lessee is determined in the same way.
In the event of reorganization procedure, the acquirer continues to assess tax depreciation of acquired assets until the end of remaining depreciation period, and in the same way as transferor, in accordance with the Rulebook.
If transferor has assessed depreciation in accordance with the rules applicable to assets acquired by 31 December 2018, the acquirer will continue to depreciate such assets in the same way.
Taxpayer is obliged to maintain following information, for each asset separately: acquisition and activation date; acquisition price; date when accounting depreciation has started; the amount of subsequent investments; amount of accounting depreciation in tax period; amount of tax deductible accounting depreciation; the amount of tax depreciation; the amount of deductible tax depreciation; net tax value of the asset at the end of tax period and net accounting value of the asset at the end of tax period.
In addition, taxpayer is obliged to provide, for all assets subject to tax depreciation in accordance with the Rulebook, information about total amount (in tax period): accounting depreciation, tax deductible accounting depreciation, tax deductible tax depreciation, net tax value as at the date when depreciation ends, as well as net accounting value as at the date when depreciation ends.
Information on the amount of depreciation that is tax deductible expense taxpayer presents in POA form – a new form which is filed with the tax balance sheet and tax return.