Freedom to depreciate (boxes 00311 and 00312)
According to the provisions of the first paragraph of article 11.3 of the LIS , the deduction of the excess of tax amortization by applying the freedom of amortization with respect to accounting amortization is not conditioned to its accounting registration in the profit and loss account.
Therefore, small entities that apply this tax incentive under the terms of article 102 of the LIS, must make the following adjustments in boxes [ ] and [00312] "Small companies: freedom of amortization (art. 102 LIS)» on page 13 of form 200:
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In box [00312] of decreases, you must include the amount of excess of the tax amortization over the accounting amortization , of the corresponding element or elements, even if said excess is not accounted for. In the tax periods subsequent to the period in which the item or items in question have been fully amortized for tax purposes, you must include in box [00311] of increases the amount of the accounting amortizations remaining on said items.
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In the tax period in which the transfer of the element or elements covered by the freedom of amortization occurs, they must include in box [00311] of increases, the amount of all corresponding negative adjustments made and pending positive integration into the tax base.
Below is an example of how small entities apply free depreciation and how they should transfer these calculations to Form 200 (you can also consult Example 2 in section “ Accelerated depreciation ” on how these entities apply free depreciation and accelerated depreciation together).
Example:
Company "R", which in 2021 meets the requirements for applying tax incentives for small companies, has acquired new tangible fixed assets for an amount of 200,000 euros. The acquisition takes place on January 1, 2021, on which date such elements are made available to Company "R" and become operational. The financial year of Company "R" coincides with the calendar year. The residual value of the items is estimated to be insignificant, so the amortizable value coincides with the acquisition price.
The average total workforce of Company "R" in 2020 was 8.4 workers. Since it does not yet know the average number of employees for the twenty-four months following 1 January 2021 (years 2021 and 2022), Company "R" must consider the convenience of determining the amount on which it can apply the freedom of amortisation for tax purposes, since the increase in average number of employees applicable to the figure of 120,000 euros cannot be calculated.
Company "R" decides to freely amortize the entire amount of 200,000 euros in 2021 under article 102 of the LIS, given that it estimates that it will meet the requirements regarding the increase in the average number of employees and their maintenance. The accounting provision for amortization is made by applying a coefficient of 20 percent, which the company estimates as effective depreciation of such elements.
Corrections that Company "R" can make to determine the taxable base for the Corporate Income Tax for 2021 (box [00312]):
| Accounting amortization | Tax amortization | Decrease in profit and loss account result |
|---|---|---|
| 200,000 x 20% = 40,000 | 200,000 | 160,000 |
As of December 31, 2022, Company "R" already knows the average workforce for the twenty-four months between 2021 and 2022, which is 10.6 workers. So,
Pm(2021 - 2022) - Pm2020 = 10.6 - 8.4 = 2.2
The limit applicable to the freedom of amortization carried out in 2021 is 2.2 x 120,000 = 264,000. Thus, Company "R", by freely amortizing 200,000 euros in 2021, did not exceed the aforementioned limit.
Furthermore, assuming that the average workforce for the years 2023 and 2024 has been 10.8 workers, the increase in the average workforce for these years, compared to 2020, is 2.4 (10.8 - 8.4). In this way, Company "R" has maintained the increase in its workforce of 2.2 workers from 2021-2022 compared to 2020. In short, Company "R" has met all the requirements for the amortization of 200,000 euros made to be tax deductible in 2021.
In this case, the corrections to be made in fiscal year 2023 and following (boxes [00311] and [00312]) will be:
| Financial year | Accounting amortization | Tax amortization | Correction | Form 200 |
|---|---|---|---|---|
| 2021 | 200,000 x 20% = 40,000 | 200,000 | -160,000 | [00312] |
| 2022 | 200,000 x 20% = 40,000 | --- | +40,000 | [00311] |
| 2023 | 200,000 x 20% = 40,000 | --- | +40,000 | [00311] |
| 2024 | 200,000 x 20% = 40,000 | --- | +40,000 | [00311] |
| 2025 | 200,000 x 20% = 40,000 | --- | +40,000 | [00311] |
Total accounting depreciation = 40,000 + 40,000 + 40,000 + 40,000 + 40,000 = 200,000
Total tax amortization = 200,000