The calculation of amortization for tax purposes
The methods and procedures for calculating amortization for tax purposes in accordance with Article 259 of the Tax Code, taking into account the changes to the federal law of 27 July 2006 N 144-FZ.
The following calculator calculates amortization for tax purposes under Article 259 of the Tax Code. For tax purposes - ie to take them to a deduction in the calculation of personal income tax.
The original article is below the calculator.
Article 259 of the Tax Code - methods and procedures for calculating amortization
There were the following changes in this article.
- For the purposes of this Chapter, taxpayers shall have the right to choose one
of the following methods of charging amortization with account taken of the
special considerations which are laid down in this Chapter:
1) the linear method;
2) the non-linear method.
1.1 A taxpayer shall have the right to include in expenses for an accounting (tax)
period capital investment expenses in an amount not exceeding 10 per cent
(not exceeding 30 per cent in the case of fixed assets belonging to the third to
the seventh amortization groups) of the historical cost of fixed assets (with the
exception of fixed assets received without consideration) and not more than 10
per cent (not more than 30 per cent in the case of fixed assets belonging to the
third to the seventh amortization groups) of expenses incurred in connection
with the extension, further equipping, reconstruction, modernization, retooling
and partial dismantling of fixed assets, the amounts of which shall be
determined in accordance with Article 257 of this Code.
- The amount of amortization for taxation purposes shall be determined by
taxpayers on a monthly basis in accordance with the procedure established by
this Chapter. Amortization shall be charged separately for each amortization
group (subgroup) where the non-linear method of charging amortization is
used or separately for each item of amortizable assets where the linear method
of charging amortization is used.
The charging of amortization on amortizable assets in the form of capital
investments in fixed assets which are amortizable in accordance with this
Chapter and on which amortization is charged using the linear method shall
commence for the lessor from the 1st of the month following the month in
which the assets concerned were brought into use, and shall commence for the
lessee from the 1st of the month following the month in which the assets
concerned were brought into use.
The charging of amortization shall cease from the 1st of the month following
the month in which the value of an item of amortizable assets was written off
in full or in which, for whatever reason, the item in question ceased to be in
the composition of the taxpayer’s amortizable assets.
When calculating the depreciation the taxpayer are not considering capital expenditures specified in paragraph 1.1 of this article.
- The taxpayer shall apply the linear method for the calculation of the depreciated property towards the buildings, structures and transmission appliances, included into the eighth to tenth depreciation groups, regardless of the deadline for putting these objects into operation.
The taxpayer shall have the right to apply to the rest of the fixed assets any one of the methods presented in Item 1 of this Article.
The method of calculating the depreciation selected by a taxpayer may not be changed within the entire period of calculating depreciation for an object of depreciable property.
The calculation of the depreciation with respect to an object of the depreciated property shall be effected in accordance with the depreciation norm established for the given object proceeding from its term of beneficial use.
- The amount of amortization charged on an item of amortizable assets for one
month shall be determined as the product of its historical (replacement) cost
and the amortization norm determined for that item.
The amortization norm for each item of amortizable assets shall be determined
according to the formula:
К = [1/n] х 100%,
where “K” is the amortization norm as a percentage of the historical
(replacement) cost of the item of amortizable assets;
“n” is the useful life of the item of amortizable assets in question expressed in
months (without taking into account the reduction of (increase in) the useful
life in accordance with paragraph 2 of clause 13 of Article 258 of this Code).
When using the non-linear method, the sum of the depreciation, calculated for one month with respect to the object of the depreciated property, shall be defined as the product of the residual cost of the object of the depreciated property, multiplied by the depreciation norm fixed for the given object.
When using the non-linear method, the depreciation norm of the object of the depreciated property shall be defined by the formula:
K = [2/n] X 100%,
where K is the depreciation norm in percentages of the residual cost applied towards the given object of the depreciated property, and
n is the term of beneficial use of the given object of the depreciated property, expressed in months.
Beginning with the month next to the month in which the residual cost of the object of the depreciated property reaches 20 per cent of the original (replacement) cost of this object, the depreciation for this object shall be calculated in the following order:
1) the residual cost of the object of the depreciated property shall be fixed for the purposes of calculating the depreciation as its basic cost for further calculations;
2) the sum of the depreciation being calculated for one month with respect to the given object of the depreciated property shall be defined by dividing the basic cost of the given object by the number of months left until the expiry of the term of beneficial use of the given object.
If in the course of a certain calendar month the organisation was instituted, liquidated, reorganised or transformed in any other way, so that in conformity with Article 55 of the present Code the tax period for it begins or ends before the end of the calendar month, the depreciation shall be calculated with account taken of the following specifics:
1) no depreciation shall be calculated by the liquidated organisation from the first day of the month in which the liquidation is completed, and by the reorganised organisation - from the first day of the month in which the reorganisation is completed in the established order;
2) the depreciation shall be calculated by the instituted organisation, emerging as a result of the reorganisation, as from the first day of the month next to the month in which its state registration was effected.
The provisions of this Item shall not be spread to organisations which change their legal organisational form.
With respect to the depreciated fixed assets used for work under the conditions of an aggressive environment and (or) of a rigid shift schedule, the taxpayer shall have the right to apply to the basic depreciation norm a special coefficient, which shall not be higher than 2. For the depreciated fixed assets which are an object of a contract of financial rent (of a contract of leasing), the taxpayer, who has a fixed asset which shall be accounted under the terms and conditions of a contract of financial rent (of a contract of leasing), shall have the right to apply to the basic depreciation norm the special coefficient, which shall not be higher than 3. The given provisions shall not be spread to the fixed assets referred to the first, second and third depreciation groups if the depreciation for the given fixed assets is calculated using the non-linear method.
The taxpayers who use the depreciated fixed assets for the performance of work under the conditions of an aggressive environment and (or) of a rigid shift schedule, shall have the right to apply the special coefficient mentioned in this Chapter only when computing the depreciation with respect to the indicated fixed assets. For the purposes of this Chapter, seen as an aggressive environment shall be the aggregate of the natural and (or) artificial factors, whose impact is responsible for a higher wear and tear (ageing) of the fixed assets in the course of their operation). To the work in an aggressive environment shall also be equated the fixed assets being in direct contact with the explosion or fire-hazardous, toxic or other kind of aggressive technological environment, which may serve as a cause (source) of an emergency situation.
Taxpayers which are agricultural organizations of industrial type (battery farms, cattle-breeding complex farms, beast farms, hothouse complex farms) shall be entitled in respect of their own fixed assets to apply to the basic depreciation norm, chosen independently subject to the provisions of this Chapter, a special coefficient of 2 at most.
The taxpayers which have handed over (received) the fixed assets that are the object of a contract of leasing concluded before the present Chapter was put into operation shall have the right to calculate the depreciation for this property using the methods and the norms existing at the moment of handing over (receiving) the property, and also applying a special coefficient of not higher than 3
- For passenger cars and passenger minibuses with the original cost, respectively, of over 300,000 roubles and 400,000 roubles, the basic depreciation norm shall be applied with the special coefficient of 0.5.
The organisations which have received (transferred) the above passenger cars and passenger minibuses into leasing shall include this property in the composition of the corresponding depreciation group and shall apply the basic depreciation norm (subject to the coefficient applied by a taxpayer for such property) with a special coefficient of 0.5.
- The calculation of the depreciation according to the depreciation norms which are lower than those established by the present Chapter shall be admissible by the decision of the head of the taxpaying organisation confirmed in the accounting policy for the purposes of taxation. The reduced depreciation norms may be applied only as from the start of the tax period and throughout the entire tax period.
In the sale of the depreciated property by taxpayers who have been applying the reduced depreciation norms, the tax base shall not be recalculated by the sum of the undercalculated depreciation against the norms envisaged by the present Article for the purposes of taxation.
An organisation acquiring the used objects of the fixed assets shall have the right to determine the depreciation norm for this property, taking into account the term of its beneficial use, reduced by the number of years (months) over which the given property was operated by its previous owners.
If the term of actual use of the given fixed asset by previous owners is equal to or exceeds the term of beneficial use thereof determined on the basis of the classification of fixed assets endorsed by the Government of the Russian Federation in compliance with this Chapter, the taxpayer shall be entitled to determine independently the term of beneficial use of this fixed asset subject to the accident prevention requirements and other factors.
An organization receiving a contribution to the authorized (share) capital or in succession during the reorganization of legal entities fixed assets that were in use, has the right to determine useful life as an established by previous owner of the assets, reduced by the number of years (months) of operation of the previous owner of the property.
- Organizations operating in the field of information technology, have the right not to apply the procedure established by this article in relation to depreciation of computer equipment.In this case, the costs of these organizations for the purchase of computer equipment are recognized as material expenses of the taxpayer in the manner prescribed by subparagraph 3 of paragraph 1 of Article 254 of this Code. For the purposes of this paragraph, as organizations working in the field of information technology, recognized organizations referred to in paragraphs 7 and 8 of Article 241 of this Code.