Vietnam: Determination of time of depreciation of tangible fixed assets

Determination of time of depreciation of tangible fixed assets is specified for each specific following cases is as follows:

Case 1: For new fixed assets (not used), the enterprises must depend on the time frame of depreciation of fixed assets specified in Appendix 1 issued together with Circular No. 45/2013/TT-BTC of the Ministry of Finance of Vietnam to determine the time of depreciation of fixed assets.

Case 2: For fixed assets used, the time of depreciation of fixed assets is determined as follows:

In which: The rational value of fixed assets is the purchase price or actual exchange ( in case of sale and purchase and exchange), the Residual value of the fixed assets or the value by assessment of a valuation organization ( in case of being given, offered, donated, allocated or transferred) and other cases.

Change of time of depreciation of fixed assets:

In case the enterprises wish to determine the time of depreciation of other new and used fixed assets compared with the time frame of depreciation as prescribed in Annex 1 issued together with Circular No. 45/2013/TT-BTC, they must plan the change of time of depreciation of fixed assets on the basis of clear explanation of the following contents:

- Technical life service of fixed assets by design;

- Present condition of fixed assets (time used of fixed assets, asset generation, actual condition of asset);

- The impact of the increase or decrease in depreciation of fixed assets on the result of business and repayment capital to credit institutions.

- For assets formed from B.O.T and B.C.C investment projects, the enterprises have to supplement the Contract signed with the investors.

Notably, on the basis of the Plan for change of time of depreciation of fixed assets approved by the competent authorities, within 20 days after the approval date of the Plan, the enterprises shall notify the directly managing tax agency for monitoring and management.

Enterprises may change the time of depreciation of fixed assets once for an asset. The extension of time of depreciation of fixed assets shall not exceed the technical life service of fixed assets and does not change the enterprises’ business results from the profit to loss or vice versa in the year making a decision on the change. In case the enterprises change the time of depreciation of fixed assets not in accordance with regulation, the Ministry of Finance and directly managing tax agency shall request the enterprises to re-determine the change as prescribed.

In case of impact factors (such as upgrading or removal of one or several parts of fixed assets) to extend or shorten the utilization time previously determined of the fixed assets, the enterprises shall re-determine the time of depreciation of fixed assets according to the three criteria mentioned above at the time of completion of generated operation and make a record stating the grounds for changing the time of depreciation for submission to the competent authority for decision.

View more details at Circular No. 45/2013/TT-BTC of the Ministry of Finance of Vietnam, effective from June 10, 2013.

Thu Ba

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