Enterprises are entitled to depreciation starting from the date of accounting for the increase in fixed assets. However, it is necessary to pay attention to informing the method of depreciation of fixed assets to ensure benefits.

This article was consulted by Lawyer Nguyen Quang Trung

Legal grounds:

• Circular No. 96/2015/TT-BTC;
• Circular No. 45/2013/TT-BTC.

We receive the following question:

Hello TLT Legal. We bought fixed assets in March and put them into use, calculating depreciation from April. But in June when the staff register the method of depreciation of fixed assets, we heard that we had to correct the starting of depreciation from July. I don’t know if that is correct and what about depreciation for April, May, and June?

Currently, the law regulates three methods of depreciation of fixed assets. Which method to choose depends on the specifics of production and business and the using period of the fixed assets. Each depreciation method will produce different costs and results of production and business activities.

Therefore, businesses need to send a notice of registration of fixed asset depreciation method to the tax authority and comply with the registered method.

Pursuant to Clause 3, Article 13 of Circular No. 45/2013/TT-BTC as follows:

Article 13. Method of depreciation of fixed assets:

3. Enterprises decide for themselves the depreciation method and time for depreciation of fixed assets according to the provisions of this Circular and notify the directly managing tax agency before starting implementation.

According to the above regulations, enterprises must notify the method of depreciation of fixed assets to the tax authority before carrying out depreciation. Therefore, the delay in sending notice on the method of depreciation of fixed assets can lead to tax risks.

Pursuant to Point d, Clause 2.2, Article 6 of Circular No. 78/2014/TT-BTC, amended and supplemented by Circular No. 96/2015/TT-BTC as follows:

Article 6. Deductible and non-deductible expenses when determining taxable income

2. Expenses that are not deductible when determining taxable income include:

2.2. Depreciation expense for fixed assets falls into one of the following cases:

d) Depreciation exceeding current regulations of the Ministry of Finance on management, use and depreciation of fixed assets.

The enterprise shall notify the method of depreciation of fixed assets that the enterprise chooses to apply to the tax authority directly managing it before carrying out depreciation (for example, notify the choice to implement the depreciation method of straight line…). Every year, enterprises depreciate fixed assets according to current regulations of the Ministry of Finance on the management, use and depreciation of fixed assets, including cases of accelerated depreciation (if conditions are met).

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According to the above regulations, businesses need to note:

• Enterprises must depreciate fixed assets according to the chosen method and notify the tax authority;
• Depreciation of fixed assets for which a notice of the method of depreciation of fixed assets has not been sent to the tax authority directly managing will not be included in deductible expenses when determining corporate income tax liability.