What are the regulations on payments for depreciation of fixed assets for enterprises in Vietnam? How to calculate income tax in the period in case enterprises make accelerated depreciation 2 times more than the prescribed level?
- What are the principles of depreciation of fixed assets in Vietnam?
- What are the methods of depreciation of fixed assets in Vietnam?
- What are the deductible expenses when determining taxable income in Vietnam? How to calculate income tax in the period in case enterprises make accelerated depreciation 2 times more than the prescribed level?
What are the principles of depreciation of fixed assets in Vietnam?
Pursuant to Clause 2, Article 9 of Circular 45/2013/TT-BTC in 2013, Clause 4, Article 1 of Circular 147/2016/TT-BTC in 2016 and Article 1 of Decision 1173/QD-BTC in 2013 stipulating the principle of deduction Depreciation of fixed assets is as follows:
All existing fixed assets of the enterprise must be depreciated, except for the following fixed assets:
All of the enterprise’s current fixed assets must be depreciated excluding the following fixed assets:
+ Fixed assets have been fully depreciated but are still used in production and business activities.
+ Fixed assets are lost during depreciation.
+ Other fixed assets managed but not owned by enterprise.
+ Fixed assets are not managed, monitored and recorded in the enterprise’s accounting books.
+ Fixed assets are used in welfare activities to serve the enterprise’s employees (excluding the fixed assets to serve employees working at enterprises such as mid-shift rest house, shift, mid-shift canteen, dressing house, toilet, clean water tank, garage, medical room or station for health examination, the employee shuttle bus, training facilities, vocational training and housing for employees built by enterprise).
+ Fixed assets from the non-refundable aid after the competent agencies have handed them over to enerprises in service of their scientific research.
+ Intangible fixed assets are long-term land use right with land use fee or receiving the legal long-term land use right.
+Type 6 fixed assets specified in Clause 2 Article 1 of this Circular are not subject to depreciation. Only annual monitoring book for each property shall be formulated and the investment in such assets shall not be recorded as a decrease.
- The depreciation of fixed assets included in the rational costs when calculating the Enterprise Income Tax shall comply with the provisions in the legal documents on enterprise income tax
- In case the fixed assets used in welfare activities to serve the enterprise’s employees specified in Clause 1, Article 9 of this Circular are engaged in the production and business activities, the enterprise shall base on the time and unitilization nature of these fixed assets to perform the depreciation in the enterprise’s business cost and notify the tax agency directly managing for monitoring and management.
- Fixed assets are lost or damaged during depreciation and may not be repaired or remedied. The enterprises shall determine the cause and responsibility for compensation of the organization or individual causing the loss or damage. The difference between the Residual value of the asset with the compensation of organization or individual causing the loss or damage, the compensation of insurance agency and the value recovered (if any), the enterprises shall use the financial reserve fund for compensation. In case the financial reserve fund is not sufficient for compensation, the enterprises may include the deficit in their rational costs when determining the enterprise income tax
- Enterprises leasing the operating fixed assets must depreciate the leased fixed assets.
- Enterprises leasing the fixed assets in the form of financial leasing (referred to as fixed assets from financial leasing) must depreciate the leased fixed assets as the fixed assets owned by enterprises under the current regulations. In case right at the starting time of asset lease, the enterprise leasing the fixed assets from financial leasing shall commit not to repurchase the leased assets in the contract of financial leasing, the enterprise leasing may depreciate the fixed assets from financial leasing under the leasing term in the contract.
- In case of re-evaluation of value of fixed assets fully depreciated for capital contribution, transfer upon split, consolidation, merger, these assets shall be evaluated by professional evaluation organizations but not lower than 20% of primary price of such assets. The time of depreciation for these assets is the time the enterprises officially take over the assets and put them into use and the time of depreciation is from 3 to 5 years. The specific time shall be decided by the enterprises but they must notify the tax authorities before implementation.
For the enterprises implementing equitization, the time of depreciation of the above fixed assets is the time the enterprises are granted the business registration certificates converted into joint stock companies.
- Enterprises with 100% state capital implementing the evaluation of enterprises for equitization by the method of discounted cash flow method (DCF), the increasing difference of the state capital between the actual value and the value in acounting books is not recognized as intangible assets and amortized into the production cost in the period but the time shall not exceed 10 years. The starting time of amortization into the costs is the time the enterprises are officially converted into joint-stock companies (with business registration certificate).
- The depreciation or stoppage of depreciation of fixed assets is implemented from the start date (by a number of days of a month) on which the fixed assets increase or decrease. The enterprises shall record the increase or decrease of fixed assets under current regulations on enterprise accounting system.
- For capital construction works completed and put into use, enterprises have recorded the increase of fixed assets by provisional price due to unrealized settlement. Upon settlement of capital construction works completed with the difference between the provisional value and settlement value, the enterprises shall adjust the primary price of fixed assets by settlement value approved by competent authorities. The enterprises shall not adjust the rate of depreciation deducted from the time the fixed assets completed and put into use to the time of settlement approval. The depreciation costs after the settlement time are determined on the basis of taking the settlement value of fixed assets approved minus (-) the number depreciated the time of settlement approval of fixed assets and divided (: ) by remaining time of depreciation of fixed assets as prescribed.
- For fixed assets monitored, managed and depreciated by enterprises under Circular No. 203/2009/TT-BTC but now ineligible for the primary price of fixed assets in accordance with Article 3 of this Circular, the residual value of these assets shall be amortized into the enterprise’s costs of business and production. The time of amortization shall not exceed three years from the effective date of this Circular.
What are the regulations on payments for amortization of fixed assets for enterprises in Vietnam? How to calculate income tax in the period in case enterprises make accelerated depreciation 2 times more than the prescribed level? (Image from the internet)
What are the methods of depreciation of fixed assets in Vietnam?
Pursuant to Article 13 of Circular 45/2013/TT-BTC in 2013 guiding the method of depreciation of fixed assets as follows:
- Methods of depreciation:
+ Straight-line depreciation method.
+ Adjusted reducing balance method
+ Method of depreciation based on volume
- Based on the capacity to meet the applicable conditions specified for each method of depreciation of fixed assets, the enterprises may choose method of depreciation appropriate with each type of enterprises’ fixed asset:
+ The straight-line depreciation method is the method of depreciation by the rate of stability calculation of each year into the enterprises’ costs of business and production of the fixed assets involved in the business operation.
The enterprises operating with high economic efficiency may accelerate their depreciation, but not more than 2 times of the depreciation rate by the straight-line method for rapid technological innovation. The fixed assets involved in business activities and accelerated their depreciation are machinery and equipment, experimental and measuring instruments, equipment and means of transport, management tools, animals, perennial orchards. When performing accelerated depreciation, the enterprises must ensure profitable business. In case the enterprises accelerate their depreciation exceeding 2 times of the rate specified in time frame for use of fixed assets provided for in Appendix 1 attached to this Circular, the excess of accelerated depreciation (over 2 times) is not included in the reasonable costs upon calculation income tax in the period.
+ Adjusted reducing balance method:
This method applies to the enterprises in areas with technology requiring rapid changes and development.
The fixed assets involved in business operations are depreciated by the adjusted reducing balance method must meet the following conditions:
- Being new fixed assets (not used);
- Being machinery, equipment, experimental and measuring instruments.
+ Method of depreciation based on volume:
The fixed assets involved in business operations are depreciated by this method are types of machinery and equipment meeting the following conditions:
- Directly related to product making;
- Determining the total number and volume of products made by design capacity of fixed assets;
- The actual capacity per month in the fiscal year is not less than 100% of design capacity.
The contents of the methods of depreciation are prescribed in detail in Appendix 2 issued together with this Circular.
- The enterprises shall decide the method of depreciation, the time of deduction of the fixed assets as prescribed in the Circular and inform the directly managing tax agency prior to implementation.
- Method of depreciation applicable to each fixed asset which the enterprise has chosen and notified the directly managing tax must be implemented consistently during the process of utilization of fixed assets. In special case of changing method of depreciation, the enterprises must clearly explain the changes in the way of using the fixed assets to bring economic benefits to the enterprises. Each fixed asset is allowed to change only one method of depreciation during the utilization and must be notified in writing to the directly managing tax office.
What are the deductible expenses when determining taxable income in Vietnam? How to calculate income tax in the period in case enterprises make accelerated depreciation 2 times more than the prescribed level?
Pursuant to Article 4 of Circular 96/2015/TT-BTC in 2015 stipulating Expenses that are deductible when determining taxable income are as follows:
"1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is deductible if all of these following conditions are satisfied:
a) The actual expense incurred is related to the enterprise’s business operation.
b) There are sufficient and valid invoices and proof for the expense under the regulations of the law.
c) There is proof of non-cash payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT).
The proof of non-cash payment must comply with regulations of law on VAT.
In case of a purchase of goods and services that are worth VND 20 million or over according to the invoice which is yet to be paid for by the enterprise when the expense is accounted for, such expense will be deductible when calculating taxable income. If the enterprise does not have proof of non-cash payment, the enterprise must remove the value of goods/services without proof of non-cash payment from expenses in the tax period in which cash payment is made (even when the tax authority and other authorities have issued a decision on tax inspection of the tax period in which such expense is incurred).
The invoices for goods and services paid in cash before the effective date of Circular No. 78/2014/TT-BTC shall not be adjusted under the regulations of this Point.
EXAMPLE 7: In August 2014, enterprise A bought goods for VND 30 million according to the invoice but enterprise A has not paid for it. In the tax period in 2014, enterprise A has included the value of such purchase in the deductible expenses when determining taxable income. In 2015, enterprise A pays for such purchase in cash. Thus, enterprise A must remove the value of such goods purchase from expenses in the tax period during which cash payment is made (the tax period of 2015).
In case an enterprise purchases goods/services related to its business operation and the invoice is printed by the cash register under the regulations of the law on invoices, such enterprise shall include the purchase in deductible expenses according to the invoice and proof of non-cash payment when determining taxable income, provided that the value on such invoice is at least VND 20 million.
In case an enterprise purchases goods/services related to its business operation and the invoice is printed by the cash register under the regulations of the law on invoices, the enterprise shall include such purchase in deductible expenses according to the invoice and proof cash payment when determining taxable income, provided that the value of such invoice is lower than VND 20 million and paid in cash."
The above case is guided in Official Letter 30587/CTHN-TTHT in 2022 as follows:
- Regarding determining and changing the depreciation period of tangible fixed assets:
The Company determines the depreciation period of tangible fixed assets in accordance with the provisions of Article 10 of Circular No. 45/2013/TT-BTC dated April 25, 2013 of the Ministry of Finance. Whereby:
+ For new (unused) fixed assets, enterprises must base on the time frame for depreciation of fixed assets specified in Appendix 1 issued together with Circular No. 45/2013/TT -BTC of the Ministry of Finance to determine the depreciation period of fixed assets.
+ For used fixed assets, enterprises shall determine the time of depreciation of fixed assets according to the provisions of Clause 2, Article 10 of Circular No. 45/2013/TT-BTC of the Ministry of Finance.
Regarding changes in the time of depreciation of fixed assets, enterprises shall follow the instructions in Clause 3, Clause 4, Article 10 of Circular No. 45/2013/TT-BTC of the Ministry of Finance depending on the actual arising of the enterprise. Karma.
- Regarding the depreciation expense of fixed assets
+ In case an enterprise meets the conditions for accelerated depreciation as prescribed at Point a, Clause 2, Article 13 of Circular No. 45/2013/TT-BTC of the Ministry of Finance, the maximum depreciation rate shall not exceed twice the rate of depreciation. costs determined by the straight-line method for rapid technological innovation.
+ Depreciation of fixed assets of enterprises if they satisfy the conditions specified in Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance, shall be included in deductible expenses when determining the income subject to corporate income tax in the tax period.
+ In case the enterprise depreciates quickly more than twice the rate specified in the time frame for using fixed assets specified in Appendix 1 to Circular No. 45/2013/TT-BTC, the excess of the accelerated depreciation rate (more than twice) are not included in reasonable expenses when calculating income tax in the tax period.
LawNet
