Amortization rules

A. Amortization base

The depreciation basis is the purchase price of the item, including any additional costs incurred until it is put into working order, or its production cost, excluding, where applicable, the residual value. In the event of the acquisition of assets and their subsequent allocation to the economic activity carried out, the amortization will be based on the acquisition value of the assets at the time of allocation.

B. Start of amortization calculation

Amortization will be carried out from the moment the item is put into operating condition if it belongs to tangible fixed assets or real estate investments, or from the moment it is in a condition to produce income if it belongs to intangible fixed assets.

For these purposes, take into account section 3.6.2 of the Resolution of March 1, 2013, of the Institute of Accounting and Auditing of Accounts, which dictates rules for the registration and valuation of tangible fixed assets and real estate investments ( BOE of March 8), which establishes that "in general, it will be understood that the putting into operating conditions will occur at the time when the fixed asset assets, after passing the necessary assembly, installation and tests, are in a condition to participate normally in the production process for which they are intended."

C. Amortization of intangible assets

As of January 1, 2016, all intangible assets are considered assets with a defined useful life and are amortizable by applying the following criteria:

In general, intangible assets will be amortized based on their useful life.
However, when it cannot be estimated reliably, the amortization will be deductible up to the maximum annual limit of one twentieth of its amount (5 percent).

Likewise, the amortization of goodwill will be deductible up to a maximum annual limit of one twentieth of its amount (5 percent).

It should be noted, however, that Article 39 of the Commercial Code, as amended by the First Final Provision of Law 22/2015 of 20 July on Auditing of Accounts ( BOE of 21 July), applicable to financial years beginning on or after 1 January 2016, provides that intangible assets are assets with a defined useful life and that when the useful life of these assets cannot be reliably estimated, they will be amortised within a period of 10 years, unless another legal or regulatory provision establishes a different period.

In the case of goodwill, the aforementioned article 39 of the Commercial Code states that it may only appear on the assets side of the balance sheet when it has been acquired for valuable consideration and it shall be presumed, unless proven otherwise, that the useful life of the goodwill is ten years.

As a consequence of the above, for intangible assets whose useful life cannot be reliably estimated and in the case of goodwill, the accounting amortization will be 10 percent while the tax amortization will be 5 percent, so in the eleventh to twentieth years there will be no accounting expense for amortization, but there will be tax amortization.

Attention: t Please note that until 31 December 2015, the tax deductibility of intangible assets with an indefinite useful life , including goodwill, was not through amortisation but through value adjustments that were required to be made due to their possible "impairment". Therefore, when a reversal of a impairment or value correction that was tax deductible occurs, the amount corresponding to the reversal of the impairment or value correction must be included within the limit established by the fifteenth transitional provision of the LIS , the commentary on which is made in the section on " Losses due to impairment of the value of assets " of this Chapter.

D. Heritage elements used

In the case of tangible fixed assets and real estate investments that are acquired used, that is, that are not put into working order for the first time, the calculation of depreciation in those cases in which depreciation by tables is used will be carried out in accordance with the following criteria:

If the acquisition value of the used item is taken as the basis for depreciation, the maximum coefficient that can be used will be double the maximum linear depreciation coefficient set in the depreciation table.
If the original acquisition price or production cost is taken as the amortization base, the maximum linear amortization coefficient set in the amortization tables for said element will be applied.
If the original purchase price or production cost is not known, the taxpayer may determine it through expert analysis, and once established, the procedure will be followed as provided in the previous letter.

For these purposes, buildings less than ten years old will not be considered used heritage elements.

E. Excess amortization

The provision in a financial year of amortizations greater than those permitted by tax law does not constitute a deductible expense, without prejudice to the fact that the excess may be deductible in subsequent periods.

Note: Article 7 of Law 16/2012, of December 27, which adopts various tax measures aimed at the consolidation of public finances and the promotion of economic activity ( BOE of December 28) established, for taxpayers who did not meet the requirements to be considered small companies, a limitation on the deductibility of the accounting amortization of tangible and intangible fixed assets and real estate investments in the years 2013 and 2014 of up to 70 percent of the amount that would have been tax deductible by application of the general amortization systems or that provided for intangible fixed assets with a defined useful life. The accounting depreciation that was not tax deductible (30 percent) can be deducted from 2015 on a straight-line basis over a period of ten years or, optionally, over the useful life of the asset.

Precision: Repealing provision 2.z) of the LIS declares Article 7 of Law 16/2012 in force with regard to Corporate Tax.