1. Principles of Depreciation of Fixed Assets (FX) for Lease
According to Article 9 of Circular 45/2013/TT-BTC, the principles are stipulated as follows:
- All existing fixed assets of the enterprise must be depreciated, except for the following cases of fixed assets:
+ Have been fully depreciated but are still used for production and business purposes;
+ Depreciation has not been fully incurred but is lost;
+ Not managed, monitored, or accounted for in the accounting records;
+ Used in welfare activities (except for fixed assets specified in Article 1, Article 19 of Circular 45);
+ Fixed assets from non-refundable aid sources for scientific research purposes;
+ Long-term land use rights with land use fees or legitimate long-term transfer of land rights;
+ Fixed assets of type 6 as specified in Article 2, Article 1 of Circular 147/2016/TT-BTC are not subject to depreciation. They are only recorded for annual depreciation value and do not reduce the capital source forming the assets.
- The depreciation expenses of fixed assets are included in reasonable expenses when calculating Corporate Income Tax;
- Enterprises leasing out fixed assets must depreciate them for the leased assets;
- The depreciation or cessation of depreciation of fixed assets begins from the date the fixed assets increase or decrease;
- Other principles are regulated as per Article 9 of Circular 45.
2. Can Depreciation Expenses for Leased Fixed Assets be Deducted for Tax Calculation?
Regulations regarding the conditions for deducting expenses when determining taxable income have been analyzed by HMLF in the article “Can Bank Loan Interest Expenses Be Deducted When Calculating Taxable Income?”. According to Article 4, Circular 96/2015/TT-BTC, depreciation expenses for fixed assets are not deductible under the following conditions:
- Not used for the production, trading of goods, or services;
- Lack supporting documentation proving ownership by the enterprise;
- Depreciation exceeds the prescribed limit;
- Not managed, monitored, or accounted for in the accounting records;
- Depreciation for fully depreciated fixed assets;
- And other specific cases as stipulated in Article 4 of Circular 96.
In principle, if the expenses meet the conditions for deduction when determining taxable income, they will be included in the deductions. However, if depreciation expenses for fixed assets fall under any of the cases mentioned in section 2, they will not be deductible
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Harley Miller Law Firm “HMLF”
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