Find out: Conditions for recording fixed assets? Principles for depreciation of fixed assets? Is depreciation of unused fixed assets recorded as a reasonable expense?
What is fixed asset depreciation? When does fixed asset depreciation start? Are unused fixed assets that have been depreciated considered reasonable expenses when settling corporate income tax? Let’s find out more details with fdiinvietnam.com in the article below.
I. Legal basis
- Circular 45/2013/TT-BTC was issued by the Ministry of Finance on April 25, 2013;
- Circular 78/2014/TT-BTC was issued by the Ministry of Finance on June 18, 2014.
II. Overview of fixed assets
1.What are fixed assets?
Fixed assets (FA) are all means of production used in the production and business of an enterprise that have great value, participate in many business cycles to create future benefits, and at the same time satisfy the conditions for recognition according to the provisions of law.
Some common fixed assets include: means of transport, machinery, equipment, software, etc.
2. Conditions for recording fixed assets
Fixed assets will be recorded if they simultaneously satisfy the following conditions:
- Sure to gain benefits in the future;
- The usage time is over 1 year or more;
- Original price is reliably determined and has a value of 30 million VND or more.
>> See more: Regulations on fixed assets.
III. Learn about depreciation of fixed assets
1. What is fixed asset depreciation?
Pursuant to Article 2, Clause 9 of Circular 45/2013/TT-BTC: Fixed asset depreciation is the calculation and allocation of the original cost of fixed assets into expenses during the depreciation period.
2. Principles of depreciation of fixed assets
Pursuant to Article 9, Clause 1 of Circular 45/2013, enterprises must depreciate all existing fixed assets of the enterprise, except for fixed assets such as:
- Lost fixed assets;
- Fixed assets from non-refundable aid;
- Fixed assets not owned by the enterprise;
- Intangible fixed assets are long-term land use rights with payment;
- Fixed assets that have been fully depreciated but are still in use for the business;
- Fixed assets are not accounted for, managed and monitored, or fixed assets are used for welfare purposes to serve employees (except for canteens, rest houses, toilets, etc.).
➨ So regardless of whether fixed assets are used or not, all existing fixed assets of the enterprise must be depreciated.
See also:
>> How to calculate depreciation of fixed assets (with examples);
>> How to account for used fixed assets.
IV. Is depreciation of unused fixed assets recorded as a reasonable expense?
Pursuant to Clause 1, Article 6 of Circular 78/2014/TT-BTC, conditions for deductible expenses when calculating corporate income tax include:
- Full invoices and documents;
- Actual costs incurred in connection with the production and business activities of the enterprise;
- There is a non-cash payment document for invoices for purchasing goods and services from 20 million VND or more.
Pursuant to Point a, Clause 2.2, Article 6 of this Circular, non-deductible expenses when calculating corporate income tax include: depreciation expenses for fixed assets not used for production and business activities of goods and services.
➨ Conclusion: All unused fixed assets must be depreciated, however, depreciation costs during the period when the fixed assets are not in use are not recorded as deductible expenses when calculating corporate income tax.
>> See more: Reasonable business expenses.
V. Illustrative example of depreciation of unused fixed assets
On July 1, 2023, the company completed the construction of a warehouse to serve the expansion of wholesale and retail business of household appliances. The total original cost of fixed assets was determined to be 300 million VND, and the expected depreciation period was 5 years.
- Average annual depreciation = 300,000,000 VND : 5 years = 60,000,000 VND/year;
- Average monthly depreciation = 60,000,000 VND : 12 months = 5,000,000 VND/month.
However, due to not finding a supplier, the company will not start operating and using the warehouse until October 1, 2023.
➨ So the depreciation cost of fixed assets in 2023 is: VND 5,000,000 x 6 months = VND 30,000,000.
In which, depreciation expense from July 1, 2023 to September 30, 2023 = VND 5,000,000 x 3 months = VND 15,000,000 is not considered a deductible expense when settling corporate income tax.
VI. Frequently asked questions when calculating depreciation of unused fixed assets
1. Are unused fixed assets depreciated?
Regardless of whether fixed assets are used or not, all existing fixed assets of the enterprise must be depreciated.
2. Are unused fixed assets subject to depreciation considered reasonable expenses when settling corporate income tax?
Depreciation costs of fixed assets that are not used or not related to business activities are not considered reasonable expenses, so these depreciation costs must be excluded when calculating corporate income tax.
3. Which depreciation expense type is not considered a deductible expense on the corporate income tax finalization declaration?
On the corporate income tax finalization declaration, fill in the amount that cannot be deducted in item B4 – Expenses that cannot be deducted when determining taxable income.
>> FREE DOWNLOAD: Corporate income tax finalization declaration (form number 03/TNDN).