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Practical Handbook for Companies 2021

Accelerated depreciation

Regulation: Article 103 LIS

1.Requirements

  • This must be new items of tangible fixed assets or real estate investments, as well as intangible fixed assets used for economic activities.

    Such elements must be in any of the following situations:

    • Acquired from third parties and made available to the company in the tax period in which it has the reduced size status.

    • Commissioned by means of a contract for the execution of work signed in the tax period in which it has the status of a small company and made available to the company within 12 months of the conclusion of the contract.

    • Built or produced by the company itself, in accordance with the time criteria set out in the two previous sections.

  • With regard to assets that can be depreciated on an accelerated basis, , the principle of accounting entry in Article 11.3.1 of the LIS,, according to which expenses that have not been taken to the profit and loss account or to a reserve account for tax purposes will not be deductible if so established by law or regulation.

    Therefore, even if the excess tax depreciation resulting from the application of accelerated depreciation is not accounted for, it is allowed as a deduction in the tax base for corporate income tax purposes.

2.Cost

  • By as a general rule, the amount of tax-deductible depreciation shall be the amount obtained by applying to the depreciable value a coefficient resulting from multiplying by 2 the maximum straight-line depreciation coefficient provided for in the officially approved depreciation tables.

    The officially approved depreciation table is that set out in Article 12.1 (a) of the LIS.

  • In the case of intangible fixed assets with an indefinite useful life referred to in Article 13.3 of the LIS, acquired in the tax period in which they are classified as small, the company may deduct 150 per cent of the amount resulting from applying this section.

    With effect for tax periods beginning on or after 1 January 2016, Law 22/2015 of 20 July 2015 on the Audit of Accounts repealed article 13.3 of the LIS and amended article 12.2 of the aforementioned law, so that all intangible assets are now considered to have a finite useful life.

    Therefore, following these amendments, a reasonable interpretation of the rule allows us to consider that, within the intangible fixed assets, now commercially classified as assets with a defined useful life, referred to in article 12.2 of the LIS, those whose useful life cannot be reliably estimated, as well as in the case of goodwill, may be deducted at 150 per cent of the amount that would be deductible if the provisions of article 12.2 of the LIS were to be applied to them.

3.Transitional regime

The new corporation tax regulation abolished the accelerated depreciation provided for in article 113 of the RDLeg. 4/2004, applicable to small companies in respect of tangible fixed assets and investment property used for reinvestment in economic activities.

However, the twenty-eighth transitional provision of the LIS has established a transitional regime that allows small companies that were applying the provisions of article 113 of RDLeg.4/2004, at periods commencing prior to 1 January 2015, continue its application with the same requirements and conditions provided for in that article:

  • Accelerated depreciation is applied to items of tangible fixed assets and investment property used for business operations in which the reinvestment of the total amount obtained in the transfer for valuable consideration of items of tangible fixed assets and investment property also used for business operations, carried out in the tax period in which the conditions of article 108 of the RDLeg are met.4/2004.

  • The amount of tax-deductible depreciation is the amount resulting from applying to the depreciable value a coefficient resulting from multiplying by 3 the maximum straight-line depreciation coefficient provided for in the officially approved depreciation tables.

  • The reinvestment must be made within the period between the year prior to the date of disposal of the transferred asset or liability and three years thereafter.The reinvestment is deemed to have been made on the date on which the assets and liabilities in which the amount obtained in the transfer is realised are made available.

  • Where the amount invested is more or less than the amount obtained on the transfer, the accelerated depreciation shall be applied only to the amount of that transfer that is reinvested.