Worldwide Capitaland Fixed Assets
Guide
2018

Capital expenditures represent one of the largest items on a company’sbalance sheet. This guide helps you to reference key tax factors needed
to better understand the complex rules relating to tax relief on capital
expenditure in 29 jurisdictions and territories.

Preface

The content is based on information current as of February 2018 unlessotherwise indicated in the text of the chapter. The tax rules related tocapital expenditures across the world are constantly being updated andrefined. This guide is designed to provide an overview. To learn moreor discuss a particular situation, please contact one of the country
representatives listed in the guide.
The Worldwide Capital and Fixed Assets Guide provides informationon the regulations relating to fixed assets and depreciation in eachjurisdiction, including sections on the types of tax depreciation,
applicable depreciation rates, tax depreciation lives, qualifying andnon-qualifying assets, availability of immediate deductions for repairs,
depreciation and calculation methods, preferential and enhanced
depreciation availability, accounting for disposals, how to submit a claim,
and relief for intangible assets.
For the reader’s reference, the names and symbols of the foreign
currencies that are mentioned in the guide are listed at the end of the
publication.
This is the second publication of the Worldwide Capital and Fixed Assets
Guide. For many years, the Worldwide Corporate Tax Guide has been
published annually along with two companion guides on broad-basedtaxes: the Worldwide Personal Tax Guide and the Worldwide VAT, GST
and Sales Tax Guide. In recent years, those three have been joined byadditional tax guides on more specific topics, including the Worldwide
Estate and Inheritance Tax Guide, the Worldwide Transfer Pricing
Reference Guide, the Global Oil and Gas Tax Guide, the Worldwide R&D
Incentives Reference Guide and the Worldwide Cloud Computing Tax
Guide.
Each of the guides represents many of hours of tax research. They
are available free online along with timely Global Tax Alerts and otherpublications on ey.com or in our EY Global Tax Guides app for tablets.
You can also keep up with the latest updates at
ey.com/GlobalTaxGuides.

EY Contacts
GlobalDavid H. Helmer
david.helmer@eyg.ey.com+1 202 327 8355

Americas
Scott Mackayscott.mackay@ey.com+1 202 327 6069

Europe, Middle
East, India andAfricaKatie Selvey-Clinton
kselvey-clinton@uk.ey.com+44 20 7951 3723

Japan
Hideaki Furukawa
hideaki.furukawa@jp.ey.com+81 3 3506 2411

Asia-Pacific
Jamie Munday
jamie.munday@au.ey.com+61 2 9276 9087

Contents

4

Argentina

Australia

BrazilCanada

China

06

12

24

30

36

FinlandFranceGermany

Greece

India

44

49

54

59

63

Italy

Japan

KuwaitMalaysia

Mexico

68

75

80

83

91

Worldwide Capital and Fixed Assets Guide 2018

Netherlands

Nigeria

NorwayPortugal

Russia

96

103

109

114

121

Saudi Arabia

Singapore

South Africa

South Korea

Spain

129

133

138

148

156

SwedenTurkeyUnited Kingdom

United States

Contacts

161

166

172

178

186

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Argentina
EY contact
Gustavo Scravaglieri+54 11 4510 2224
gustavo.scravaglieri@ar.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
Yes, with respect to movable property
Range of rates used
0%–100%Depreciation method used to calculate tax
deduction
Straight-line, although other methods can beused with supported technical reasons

6Worldwide Capital and Fixed Assets Guide 2018

1. Entitlement to claim
Legal ownership is required to entitle a claim to tax depreciation.

2. Allocation of tangible assets to tax depreciation lives andrates
Several tax opinions have expressed that if a movable asset is part of a building but does not constitute a sole unit with the building
in terms of functionality, a different tax depreciation method applies (for example, machinery and equipment).
The tax legislation only provides a 2% rate of tax depreciation per year for immovable property (except for land). Calculations mustbe performed on a quarterly basis.
For other assets, the tax legislation does not provide any lives or rates. In general terms, accounting criteria are followed to
calculate tax depreciation. However, other criteria could be adopted if there are technical reasons that support such adoption.
In the General Instruction (SDG ASJ-AFIP) 7/2012, the tax authorities expressed that given the lack of particular rules, in orderto calculate the tax depreciation of movable assets, it should be understood that the probable useful life refers to a reasonableestimation, and in this regard, the concepts of obsolescence and efficient useful life should be considered when making the
calculation.

2.1 Assets that qualify for tax depreciation
Specific fact patterns may determine different depreciation rates. The useful lives and depreciation rates indicated below are ageneral indicator.
Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Plant, machinery andequipment

10 years (except forindustrial plants,
which may be
regarded as buildings)

Straight-line method

10%

Other methods could
be used, e.g., units ofproduction depreciation
method or units of timedepreciation method,and other depreciation
rates could be applied if
supported by technicalreasons.

Buildings

50 years

Straight-line method2%

A higher rate could beapplied in the event thata lower useful life could
be proved.

Furniture, fittings or
fixtures

10 years

Straight-line method

10%

Other methods andrates could be used if
supported by technicalreasons.

Computer hardware

3 years

Straight-line method

33%

Other methods andrates could be used if
supported by technicalreasons.

Computer software

3 years

Straight-line method

33%

Other methods andrates could be used if
supported by technicalreasons.

Aircraft

5 years

Straight-line method

20%

Other methods andrates could be used if
supported by technicalreasons.

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Argentina

Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Transport other thanmotor cars

5 years

Straight-line method

20%

Other methods andrates could be used if
supported by technicalreasons.

Motor cars

5 years

Straight-line method

20%

Other methods andrates could be used if
supported by technicalreasons.

Car parks

50 years

Straight-line method2%

A higher rate could beapplied in the event thata lower useful life could
be proved.

Office equipment(including office furnitureand fixtures)

10 years

Straight-line method

10%

Other methods andrates could be used if
supported by technicalreasons.

Agricultural machineryand equipment

8 years

Straight-line method

13%

A higher rate could beapplied in the event thata lower useful life could
be proved.

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

In general, costs would be added to the value of land. The specific case should be reviewed.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Preliminary costs (start-up costs) can be deducted in the year in which they were incurred or amortized over a maximum term of
five years, at the taxpayer’s option.

Land remediation — removing asbestos, Japanese knotweed
According to some interpretations, if the cost is considerable, it should be added to the cost of the land. Otherwise, it could be
added to the cost of the assets to be depreciated located on such land.

Own labor capitalized
Not deductible.

2.4 Availability of immediate deductions for repairs
There are no rules that allow any asset to be written off in its entirety in the year of acquisition.
Nevertheless, a particular analysis of each case should be performed. If there is a reasonable justification, for example, based
upon a professional opinion that may support the entire depreciation of the asset, the possibility to apply these criteria could beconsidered.

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Description

DetailRepairs

Not considered an asset. In this regard, they are deducted in the fiscal year they are accrued.

Items of a revenue
natureN/A

The tax legislation provides for the concept of repairs and also defines the concept of “improvements.”
In this regard, repairs that may involve the simple maintenance of the asset are considered as expenditures and, as a consequence,are deductible as expenses.
On the other hand, improvements are disbursements that do not qualify as ordinary repairs that involve the simple maintenanceof the asset. They imply an increase in the value of the good of at least 20%. In addition, doctrine has expressed that, to qualify as
improvement, this expense should increase the useful life of the asset.
Pursuant to income tax law, improvements are not deductible as expenses in the year of accrual. They would be capitalized anddepreciated over the life of the asset.
Tax depreciation may differ from the accounting depreciation used in the financial statements.

3. Depreciation and calculation methods
Methods used

Straight-line is the preferred method, but the other methods can be used if supported
by technical reasons.

Frequency

Daily, monthly or annual basis.
The tax legislation is only specific regarding the tax depreciation calculation for
immovable property.
For other assets, accounting criteria are followed or even other criteria could be
adopted if there are technical reasons that support it.
As a consequence, tax depreciation could be calculated on a daily, monthly or annual
basis, depending on the case.

Year of acquisition

The Income Tax Law (ITL) provides, in the case of immovable property only, that tax
depreciation must be calculated on a quarterly basis.
As no provisions are stated to calculate the tax depreciation for other assets,accounting criteria or any other criteria according to each case could be adopted. The
most important consideration would be to keep homogeneous criteria.

Year of disposal

A balancing change or allowance may arise to make the accurate adjustments to thecapital assets; the residual tax value of the corresponding asset should be deductedfrom the sale price.

Ability to use different methods for different assets

It is not necessary, but as mentioned, the uniformity of the criteria adopted ispreferable.
In this regard, different methods may be used for different classes of assets, but
within the same group of assets, it is preferable to apply the same method. However,each case should be analyzed on its own merits.

Ability to switch methods

Yes. The methods applied could be changed from one year to another if technicalreasons justified the change, but authorization from the tax authorities must be
obtained.

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Argentina

4. Preferential and enhanced depreciation availability
Commonly, the introduction of benefits for investments in certain industries is linked with the approval of the Annual Budget Law.
Asset used inComment on specific application and benefits available

Production of biofuels, oil and gas exploration,
production of electric energy, production ofbioethanol, employment of renewable energy
sources for the obtainment of electric energy

Law 25,924 states the corresponding quotas of tax depreciation. The use of this benefit issubject to the condition that the asset remains in the equity for three years from the start ofits utilization.

MiningLaw 24,196 provides the corresponding quotas of tax depreciation for each asset. The tax
authorities and other corresponding authorities should be informed of the method of tax
depreciation adopted.

ForestryLaw 25,080 provides the corresponding quotas of tax depreciation for each asset. In
addition, it states that the tax depreciation of each fiscal year should not surpass the income
arising from the development of forestry activities.

Production of biotechnology

The accelerated tax depreciation may be performed from the moment the asset starts being
utilized.

In addition, Law 27,191 provides accelerated depreciation benefits related to the purchase of
new fixed assets or infrastructure services performed to develop projects based on the use ofrenewable energy sources.

The applicable depreciation rate should be analyzed in each specific case.

5. Accounting for disposals
To make the accurate adjustments to the capital asset, the residual tax value of the corresponding asset should be deductedfrom the sale price. In case of a disposal of an asset, it is considered the difference between the original cost of the asset and theaccumulated tax depreciations.
There are no provisions in the tax legislation for the case that an asset is scrapped because it has no salable value. According tosome interpretations, the residual tax value should be deducted in the fiscal year the asset is scrapped. It is furthermore advisable
to possess supporting documents to prove the destruction of the assets, e.g., minutes drawn up by a notary public stating thedestruction of the asset.
As per the tax treatment of the disposal pursuant to Argentine law, if gains arise from the disposal of a movable asset (bydeducting the residual tax value from the sale price), the taxpayer would be subject in principle to pay the income tax. This should
be analyzed in each specific case.

6. Making a claim
Deductions corresponding to tax asset depreciations should be claimed within the income tax return.
It is advisable to maintain supporting documents, such as a report with an expert’s opinion that may back up the adopted tax
depreciation criteria, to be shown to the tax authorities if necessary.

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Argentina

7. Intangible assets
Tax depreciation for purchases of intangible assets would only be available if they involve a right with a determined useful life.
Type of asset

Rates/lives

Trademarks

Will depend on the period of time for which the right of use was granted

Patents, copyright, design, know-how or similar item

Will depend on the period of time for which the right of use was granted

Goodwill

Not deductible

License or permit

Will depend on the period of time for which the right of use was granted

8. Adjustment for inflation
According to the provisions of the ITL, amended by Tax Reform Law 27,430 (hereinafter the Law), the depreciation of assets
purchased and investments performed after 1 January 2018 would be adjusted on the basis of the percentage variations of
the Internal Wholesale Price Index published by the National Institute of Statistics and Census, according to the criteria to beestablished by the Tax Authorities. Such adjustment is not applicable to the depreciation of assets acquired or investments
performed before 1 January 2018.

9. Tax revaluation
According to the Law, residents may opt to revalue, as an exception, the value of the assets that were affected with the generationof taxable income from Argentina, as from the fiscal period that ends after the entry into force of the Law (i.e., 29 December2017).
In the event of applying the regime, the new tax value of the assets will be, with the option or choice of the taxpayer, that arisingfrom a valuation carried out by an independent appraiser, or that determined by the application of the “revaluation factor,” asestablished in The Law for each year or period of acquisition or construction of the asset, on the tax values originally determined.
In addition, a special tax will be applied on the difference between the value of all revalued assets and the determined tax value, atthe close of the last fiscal period once the law enters into force.
However, taxpayers who opt for the special revaluation regime must resign the promotion of any judicial or administrative process
by which they claim, for tax purposes, the application of adjustment procedures of any nature, and to desist from those that theywould have started with that purpose.

10. Accounting revaluation
In relation to accounting matters, the Law proposes for the entities that must prepare financial statements, the possibility ofrevaluing the values of the assets recorded in their balance sheets and normalizing their equity. For that purpose, the methods
available to practice the tax revaluation may be applied.
Tax depreciation for purchases of intangible assets would only be available if they involve a right with a determined useful life.

Worldwide Capital and Fixed Assets Guide 201811

Australia
EY contacts
Mark Dawson+61 2 8295 6194
mark.dawson@au.ey.com

Skye Richmond+ 61 3 9655 2646
skye.richmond@au.ey.com

Elisabeth Messina+ 61 8 9429 2419
elisabeth.messina@au.ey.com

Ada Wu+ 61 2 9248 5757
ada.wu@au.ey.com

At a glance
Terminology used by country todescribe the recovery of capital andfixed assets
Capital allowances
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
0%–100%Depreciation method used to calculate
tax deduction
Straight-line/prime cost, double
diminishing value (declining) method

12Worldwide Capital and Fixed Assets Guide 2018

1. Entitlement to claim
A taxpayer who “holds” the asset — typically the owner (legal owner or equitable) — may claim depreciation. A taxpayer who“holds” an asset may also be one of the following individuals or entities:• A lessee who has the right to use a luxury car• A lessor who has the right to recover an asset that is subject to a lease and is fixed to land
• A partnership asset, if held by the partnership and not the individual partners• An entity that has the information can hold mining or prospecting information (mining information is geological, geophysicalor technical information that relates to the presence, absence or extent of deposits of minerals in an area, or is likely to help in
determining this); different subdivisions may apply• Where it is a joint ownership of the assets (but not a partnership), each taxpayer is considered to hold assets jointly, andconsequently, each taxpayer’s share of the asset is treated as a separate depreciating asset
Whether an asset (rather than its components) is a depreciating asset is a question of fact and degree, determined in light of all thecircumstances. A “functionality test” is usually applied to identify a “unit of plant,” in that the function of the asset need only beseparately identifiable, rather than be self-contained or isolated. This means that if assets comprise a number of parts, they may
be depreciated separately. A fixture on land, whether removable or not, and any improvements to the land or fixtures are treatedas separate depreciating assets.

2. Allocation of tangible assets to tax depreciation lives andrates
The decline in value of a depreciating asset is calculated on the basis of the effective life of the asset. Taxpayers may calculate
either their own estimate of the effective life (“self-assessed”) of a depreciating asset or rely on the Commissioner’s publishedrates (see below). The choice must be made for the year in which the asset is first used. There are exceptions for which the
taxpayer is obliged to work out depreciation using a prescribed statutory rate (e.g., buildings and structural improvements, certain
intangible assets, capped-life assets).

Self-assessed effective life
The self-assessed effective life adopted must have regard to the total estimated period the asset can be used by any entity for the
purposes of producing income, exploration or prospecting, mining site rehabilitation or environmental protection activities, or
conducting R&D activities, depending on the asset’s expected use.

Commissioner’s determination of effective life
The Commissioner regularly publishes recommended effective lives for many depreciating assets that taxpayers may adopt, which
can be found at ato.gov.au. The Commissioner’s current effective lives are included in TR 2017/2 — income tax: effective lifeof depreciating assets (applicable from 1 July 2017), and are generally updated annually. There is also a “statutory cap” to theeffective lives of specific assets where the taxpayer has otherwise chosen the effective life determined by the Commissioner.

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Australia

2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax depreciation
methodPlant, machinery andequipment

There is a wide range.

Prime cost (PC)/straight-line
or diminishing value (DV)Applicable tax
depreciation rate

Comments
The rate varies depending
upon the industry and theparticular asset type. Referto the tax determination forparticular assets.
Foundations for plantand machinery (integral
to operation, but notincorporated into plant andmachinery itself) — 40 years.

Buildings

25 years orPC

2.5% or 4%

40 years

Buildings and foundations
Construction expenditure (andnot the acquisition cost) on
buildings is typically deductible
under the capital works
provisions (Division 43).
The deduction is at the rate of
2.5% or 4% depending on thedate the work begins and theuse of the building.
Components such as air
conditioning systems, lifts andescalators would be consideredplant and depreciable at fasterrates.
Relief under plant, machineryand equipment rules would beavailable where the plant andbuilding become so integrated
that the building is treated aspart of the plant. For example,
a building would form an
integral part of the plant when
it is absolutely essential tosupport the working plant.
Where the whole building isplant, concrete foundations orfootings in which the uprightsof the structure are embedded
may also qualify as plant. The
cost of excavating foundations
may be part of the depreciable
cost but not general site
preparation.
If only part of a building isplant, the cost of the building
is apportioned between plantand capital works (Division43). Indirect construction
costs having a link to both theplant and non-plant building
components may be allocatedin proportion to direct costs.

Improvement ofnonresidential buildings

14

40 years

Worldwide Capital and Fixed Assets Guide 2018

PC

2.5%

Australia

Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

PC

Construction of buildingsHotel

25 years

4%

Industrial

25 years

4% Other building (e.g.,
office premises)

40 years

2.5%

Furniture, fittings or
fixtures10–50 years

PC/DV

Computer hardware

4 years

PC/DV

Computers, generally
laptops

2–4 years

PC/DV

Computer software(includes acquired
software)5 years (4 years for
assets first used
between 13 May 2008
and July 2015)

PC

In-house:Year 1 = 0%
Year 2 = 30%
Year 3 = 30%
Year 4 = 30%
Year 5 = 10%
Acquired:prime cost

Expenditure on developing
in-house software may bepooled. A separate softwaredevelopment pool must be
created for each income year
in which expenditure on such
software is incurred.
In-house software isexpenditure on developing
software or on a right to use
computer software that you
acquire, develop or haveanother entity develop for use
in your business.
Acquired software must use
prime cost method and be
depreciated over five years ona daily basis.

Aircraft — general use

8 or 10 years

Transport: Motor cars (load of lessthan one tonne and lessthan nine passengers)

8 yearsBuses

15 years

PC/DV

If the plane or helicopter
is used predominantly for
agricultural spraying or
agricultural dusting, thencapped effective life of eight
years is applied. Otherwise,
capped effective life of 10
years may apply.

PC/DV

Lives quoted are thecurrent lives set out in theCommissioner’s list. Capped
effective lives may also apply,
depending on the gross vehicle
mass of the asset.

Taxis

4 years Light commercial

12 years Motorcycle

7 years

Trucks15 years

Car park assets

5–20 years (assets)

PC/DV

Sealed car parks

40 years (buildings)

PC

Note: the depreciable costof motor cars is capped at
AUD57,581 per car for theincome year of 2017/18. The
limit is indexed annually.
Car parks would typically bea structural improvement
depreciated under Division 43(2.5% PC).

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Australia

Asset type

Useful life for tax

Type of tax depreciation
methodOffice equipment

Applicable tax
depreciation rate

Comments

PC/DV

Lives quoted are thecurrent lives set out in theCommissioner’s list.

Chairs

10 years

Desks

20 years

Reception assets

10 years

Screens

20 years

Tables

10 years

Workstations

20 years Printer/copier

5 years

Whiteboards

10 years

Land improvements

Varies dependingon the types ofimprovements madePC/DV

A land improvement can be a
separate depreciating asset,
depreciable over its effective
life. Some land improvements
may merely form part of thenon-depreciable cost of theland.

Agricultural machineryand equipment

3–40 years

PC/DV

Effective life largely depends
on the asset type and theagricultural sector where it is
used.

Property used in R&D

N/A

N/A

Effective lives as noted above
apply.

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Land is specifically not depreciable. Any gain or loss is only recognized on disposal. Fixturesor land improvements may be depreciable.

Trading stockThis is specifically not depreciable for Australian tax purposes.

Goodwill

This is not depreciable for Australian tax purposes. Any gain or loss is recognized on disposal.

Telecommunications

Expenditure incurred on rights to use an international telecommunication system before
22 September 1999 and domestic telecommunication systems before 12 May 2004 do
not qualify as being a depreciating asset. Therefore, any decline in value attributable tosuch expenditure was not deductible under the capital allowance provisions. In certain
circumstances, a deduction may have been available for such expenditure under otherprovisions contained in the Tax Acts. This would be factually specific to the circumstances.
Expenditures on rights to use international and domestic telecommunication systems
incurred on and after these dates are intangible depreciating assets and a depreciation
deduction should be available for their decline in value.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Amounts paid to buy or create an asset (labor and materials) or to bring the asset to its current location and conditions arecapitalized to the cost of the asset. This can include the following costs: incidental (stamp duty), site preparation, professional fees
and testing asset functionality.

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Australia

Land remediation, dismantling, restoration
When an entity uses an asset, it may incur a contractual, statutory or constructive obligation to dismantle and remove the item or
restore the site to minimum standards at the end of an asset’s life. These costs may only be deducted in the period when incurred,and not merely when the liability is provided for.

Own labor capitalized — work on developing software, for example, or carrying out work on property
Employee costs in relation to initial acquisition (including installation and construction) of an asset are generally capitalized. Allother ongoing salaries are expensed if these are “revenue” in nature.

2.4 Availability of immediate deductions
In certain circumstances expenditure that is capital in nature may be immediately deductible (see table below for qualifying
expenditure).
Description

DetailAssets below a certain value

An immediate 100% deduction applies for depreciating assets costing AUD300 or less,subject to satisfying all of the following conditions:• The asset was not part of a set of assets where the total cost exceeded AUD300.
• The total cost of the asset and any identical item started to be held in that year did notexceed AUD300.
• The asset was used for producing assessable income that is not income from carrying on abusiness.
For example, minor assets used to derive salaries and wages may be immediately deductible.

Repairs

Repairs and maintenance of a non-capital nature are deducted as incurred.

Environmental protection activities (EPA)

An immediate deduction can be claimed for expenditure incurred for the sole or dominant
purpose of carrying on EPA. These are activities undertaken to prevent, fight or remedy
pollution or to treat, clean up, remove and store waste from earning activities.

Land care operations

The deduction is available as long as the land is used for either a primary production businessor for carrying on a business for a taxable purpose from the use of rural land. The deduction
may be claimed even when the taxpayer is the lessee of the land.

Exploring or prospecting

Capital expenditure for exploring or prospecting for minerals is immediately deductible. Note:the costs of mining rights and information acquired from a nongovernment third party are
not immediately deductible but may be deducted over the shorter of 15 years or the life of
the mine/permit.

An immediate deduction can be claimed for repairs to machinery, tools or premises used to produce assessable business income,provided the expenses are not capital in nature.
“Repairs” is not defined but adopts its ordinary meaning. Taxation Ruling TR 97/23 discusses the meaning of “repair” andconsiders that these remedy or make good of defects. A repair involves restoration of the efficiency of function of the asset
without changing its character. A repair merely replaces a part of something or corrects something that is already there and has
become worn out or dilapidated. The treatment of repairs could be different for accounting and tax purposes.
The work may go beyond “repairs” if it (a) changes the character of the property or (b) does more than restore its efficiency offunction.
Expenditure is considered capital where the expenditure is for work that is a renewal or reconstruction of the entirety of theasset. Here, “entirety” means that the asset is identified separately as a principal item of capital equipment or that it is an integral
part, but only a part, of the entire premises and is capable of providing a useful function without regard to any other part of thepremises or that it is a separate and distinct item of plant in itself from the thing or structure that it serves.

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Australia

Small business concessions
Small businesses can access a range of concessions including payment and reporting options. From 1 July 2016, a small businesstax concession is available to all businesses with turnover less than AUD10 million. This applies to sole traders, partnerships,
companies or trusts.
Small business concessions include simplified depreciation rules, as described below; accelerated depreciation for primary
producers; deductions for professional expenses for startups; immediate deductions for prepaid expenses; lower company tax
rate; simplified trading stock rules; and others.
An immediate write-off is available for depreciating assets costing less than AUD1,000 (low-cost assets) (this was reduced from
AUD6,500, effective 1 January 2014) for small businesses. An immediate write-off is also available for assets acquired for lessthan AUD20,000 and installed ready for use after 7:30 p.m. (AEST) on 12 May 2015 and up until the end of 30 June 2019. Small
businesses may also be eligible for other concessions.
Simple pooling facility is available for other depreciating assets costing more than AUD1,000 (AUD20,000 for assets acquired
12 May 2015 through 30 June 2019). Buildings are specifically excluded from the pooling arrangements unless the building
would qualify for deduction under Division 40. The value of the pool is depreciated at a rate of 15% in the first year and then at
30% per year thereafter.

3. Depreciation and calculation methods
Methods used

Straight-line/prime cost, double diminishing value (declining) method

Frequency

Annually
An annual calculation is required based on the days held and used. For example,
diminishing value is calculated as opening written-down value (WDV) x (daysheld/365) x (2/effective life).

Year of acquisition

Where a depreciating asset is held and used for only part of the income year, thedecline in value is calculated based on the number of days the asset is held and used
or installed ready for use — i.e., cost x (days held/365).

Year of disposal

Assets continue to depreciate until disposal. When the asset is disposed of, any gain(or loss) on disposal is treated as assessable (or deductible).

Ability to use different methods for different assets

The choice of method is exercised on an asset-by-asset basis, and a different method
can be used by identical assets.

Ability to switch methods

The choice of method for a particular asset applies for that income year and all later
years in which the taxpayer claims a deduction in decline in value of that asset.

Taxpayers may use either of two methods to calculate the decline in value of a depreciating asset: prime cost (straight-line)or the diminishing value (double diminishing) method. The choice must be made before submitting the income tax return for
the income year to which the choice relates. The choice is deemed to have been made from the taxpayer’s capital allowances
disclosures within the income tax return.
The choice is exercised on an asset-by-asset basis. The choice of straight-line or double diminishing cannot be changed once thechoice is made (i.e., after submitting the income tax return for a particular year).
For a limited number of assets, however, no choice of method is available, and the taxpayer must use the prime cost method. This
includes intangible depreciating assets, such as in-house software, intellectual property (IP), spectrum licenses and data-castingtransmitter licenses.

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Australia

Changing effective life
A taxpayer may choose to recalculate the effective life of a depreciating asset if the nature of use of the asset changes and thosechanged circumstances make the current estimate inaccurate. A taxpayer can only make a new estimate of the effective life after
the end of the income year in which the taxpayer first started to use the asset.
A taxpayer is required to recalculate the effective life of a depreciating asset if:• The asset’s cost increases by at least 10% in an income year.
• The taxpayer either has self-assessed the effective life or has used the Commissioner’s determination of effective life andadopted the straight-line method.

4. Preferential and enhanced depreciation availability
Tax depreciation method

Comment on specific application and benefits available

Assets used in R&D

To encourage companies to conduct R&D activities in Australia, an entity is entitledto a tax offset, referred to as the “R&D tax incentive” for eligible R&D expenditurefrom 1 July 2011. The entity must satisfy both the R&D and the depreciating
assets provisions to obtain concessional depreciation deductions.
This can have the result that for eligible activities, an entity may claim an R&D
tax offset (43.5% for SME, 38.5% for larger R&D groups). The tax offset may
be a refundable tax offset if the R&D entity’s aggregated turnover is less than
AUD20 million. The additional R&D concession is capped at AUD100 million ofnotional deductions.

Primary producers

A primary production business includes, inter alia, (a) cultivating plants, fungi
seeds, etc.; (b) maintaining animals for sale; (c) manufacturing dairy produce fromraw material produced; (d) catching fish, mollusks, etc.; (e) culturing pearls; (f)planting or tending trees; (g) felling trees; and (h) transporting trees.
Primary producers may be entitled to concessional depreciation deductions:• Annual deductions over 10 years for the cost of telephone lines• Accelerated write-off for new horticultural plants and grapevines• Three-year write-off for expenditure on water facilities• Outright deduction for land-care operations• Special deduction for timber depletion and other timber industry concessions
Primary producers are entitled to immediately deduct the cost of fencing (except
for stockyard, pen and portable fence) and water facilities such as dams, tanks,
bores, irrigation channels, pumps, water towers and windmills incurred from 7:30
p.m. (AEST) on 12 May 2015.

Exploration or prospecting expenditure

Capital expenditure on exploration or prospecting for minerals (including
petroleum) or quarry materials obtainable by “mining or quarrying operations” isdeductible in the year in which it is incurred. Examples include transport, materials,
labor and administrative costs incurred in carrying out exploration or prospecting
activities.
The cost of depreciating assets that are first used for exploration purposes isalso immediately deductible (excluding the costs of mining rights and informationacquired from a nongovernment third party).

Worldwide Capital and Fixed Assets Guide 201819

Australia

Tax depreciation method

Comment on specific application and benefits available

Project pools

Certain mining project expenditure and transport expenditure or other capitalproject expenditure may be deductible over the estimated life of the project (called“project amounts”). The deduction is not limited to expenditure relating to mining
projects and can include certain costs of infrastructure projects.
Project amounts only include capital expenditure that is not otherwise deductible
and does not form part of the cost of a depreciating asset held by the taxpayer.
That is, this covers those capital amounts that may not otherwise be deductible.
Project amounts that are not mining capital expenditure and transport capital
expenditure may also be deductible. Cost must be directly connected with a projectand must be one of the following types of expenditures:• An amount to create or upgrade community facilities associated with the project• An amount for site preparation costs for a depreciating asset• An amount for feasibility studies for the project• An amount for environmental assessments for the project• An amount incurred to obtain information associated with the project• An amount incurred to obtain a right to intellectual property• An amount incurred for ornamental trees or shrubs
These amounts are deductible on a double diminishing value basis over the life of
the project.

Site rehabilitation expenditure

An immediate deduction is available for current and capital expenditure on
rehabilitation of sites that have been used for “mining, quarrying or petroleum
operations” (including exploration activities).
“Rehabilitation” involves the restoration of the site to a reasonable approximationof its “pre-mining condition.”
An immediate write-off of capital expenditure incurred on “environmental
protection activities” is also available for a broader range of expenditure (e.g.,preventive expenditure) than under the mine site rehabilitation measures.

Environmental protection

Expenditure, whether capital or revenue, that is incurred for the sole or dominant
purpose of carrying on an environmental protection activity is deductible in theincome year in which it incurred. This immediate deduction is not available ifenvironmental protection is only a residual or subsidiary purpose.

Carbon sink forests

An immediate deduction is available for capital expenditure on establishing trees
in carbon sink forests in the 2007–08 income year and in later income years up to
and including the 2011–12 income year.
From 1 July 2012, a deduction may be claimed for a period of 14 years and 105
days at a write-off rate of 7%. The deduction is only available if the following
conditions are met:
• The primary and principal purpose for establishing the trees is carbon
sequestration by the trees.
• Expenditure is not incurred under a managed investment scheme (MIS).
• The trees meet certain forest characteristics and adhere to certain
environmental resource management guidelines.

5. Accounting for disposals
When a depreciable asset is disposed of, a “balancing adjustment event” occurs. The difference between the asset’s tax writtendown value on the date of disposal (i.e., cost less accumulated depreciation) and any proceeds received on disposal is recognized
as assessable income or a deductible expense (as a revenue deduction). No additional tax deduction is claimed after the disposal.
The proceeds received may be deemed to be equal to the market value of the asset at that time.
If an asset is scrapped, then provided a taxpayer stops using it, or having it installed ready for use, and the taxpayer expects tonever use it again, this may give rise to a balancing adjustment event.

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Australia

6. Making a claim
A claim for depreciation is made in the income tax return. The tax system is a self-assessment, where minimal disclosures are
required in the income tax return for capital allowances. For the 30 June 2016 income year, these include tax depreciation
disclosures, adjustable values of depreciating assets, information on disposal of depreciating assets and termination value ofdepreciating assets.

Record-keeping requirements
A taxpayer must keep the following information for a depreciating asset:
1

2• The first and second element of cost

• The opening adjustable value for the income year
• Any adjustments made to cost or adjustable value• The date the taxpayer started to hold the asset• The rate or effective life used to work out the decline in value and any reduction for use of the asset for nontaxable purposes• The adjustable value at the end of the income year
• Any recoupment of cost included in assessable income• If a balancing adjustment event occurs, e.g., a disposal or scrapping, the date of the balancing adjustment event, termination
value (i.e., proceeds), adjustable value at that time, the balancing adjustment amount, any reduction of the balancing
adjustment amount and details of any rollover or balancing adjustment relief
The following must also be kept:• Details of how you worked out the effective life of a depreciating asset if the Commissioner’s effective life was not adopted• If the taxpayer has recalculated the effective life of an asset, the income year of the recalculation, the recalculated effective life,
the reason for the recalculation and details of how the recalculated life was worked out• Original documents such as suppliers’ invoices and receipts for expenditure on the depreciating asset
These documents are not required to be submitted to the Australian Taxation Office (ATO) but must be retained for five years.

7. Intangible assets
Intellectual property (IP)
Depreciating assets include items of IP, such as a patent, a registered design or a copyright (or as licensee of any of these items).
Trademarks are not depreciating assets.
The decline in value of such items is calculated over the statutory effective life using the prime cost method (refer to below).
Proposed changes to the tax depreciation rules would allow taxpayers the option of self-assessing the effective life of intangible
assets rather than use the statutory effective lives. If enacted as currently drafted, these changes would apply to assets that start
to be held on or after 1 July 2016.

1

The first element of cost is generally the amount you pay to hold the asset. Market value substitution rules or other “deeming rules” may also
apply.

2

The second element of cost is amounts incurred after you start to hold the as set to bringing the as set to its present condition and location (e.g.,capital improvements) and expenditure you incur that is reasonably attributable to the asset when you stop holding this asset or will never use it
again.
Worldwide Capital and Fixed Assets Guide 201821

Australia

Computer software
In-house software is computer software, or a right to use computer software, that is acquired or developed mainly for use inperforming the functions for which it was developed. The expenditure on in-house software will be deducted in the following ways:• The decline in value of acquired in-house software is determined using an effective life of five years (apply to expenditures
incurred on or after 1 July 2015) and the prime cost method.
• Expenditure incurred in developing in-house software may be allocated to a software development pool (see below).
• If the above expenditure is not pooled, it can be capitalized into the cost of a resulting unit of in-house software, and its decline
in value is determined using an effective life of five years and the prime cost method.

Software development pool
A taxpayer may choose to allocate to a software development pool expenditure incurred on developing in-house software if its
intended use is strictly for a taxable purpose. Once expenditure is allocated to a pool, all such expenditures in that year or a later
year must be allocated to a software development pool. A deduction for expenditure in a software development pool is not claimed
in the income year in which it is incurred. Rather, a deduction is allowed at a 30% rate in each of the following three years and 10%
in the final year (year five) (from 1 July 2015).

Other intangible assets
Type of asset

Rates/lives

Standard patent

20 yearsInnovation patent

8 years

Petty patent

6 years

Registered design

15 years

Copyright (other than film copyright)

Shorter of 25 years from the acquisition of copyright or the period
until copyright ends

License (not relating to copyright or in-house software)

License term

License relating to copyright (except film copyright)

Fewer than 25 years from when taxpayer became licensee, and theperiod until license ends

In-house software

5 years (from 1 July 2015)

Spectrum license

License term

Data-casting transmitter license

15 years

Telecommunications site access rightTerm of the rightFilm copyright (acquired on or after 1 July 2004) is specifically excluded from general treatment for ordinary copyright, anddeductions for its decline in value are available on the basis of effective life, using either prime cost or diminishing value.
The effective life of an indefeasible right to use a telecommunications cable system is the effective life of the cable over which theright is granted. The taxpayer may self-assess such effective life, or the Commissioner can determine this.
An intangible asset (other than a copyright, a license related to a copyright and in-house software) acquired from a former holderof the asset is depreciable over the remaining number of years that are yet to elapse at the start of the year when the asset was
acquired.

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Australia

Effective life of intangible depreciating assets: mining, quarrying or prospecting rights
Type of asset

Rates/lives

A mining, quarrying or prospecting right relating to mining operations(except for obtaining petroleum or quarry materials)

The life of the mine, proposed mine, or, if there is more than one, thelife of the mine that has the longest life

A mining, quarrying or prospecting right relating to mining operations
to obtain petroleum

The life of the petroleum field or proposed petroleum field, or, if there
is more than one, the life of the petroleum field that has the longest
life

A mining, quarrying or prospecting right relating to mining operations
to obtain quarry materials

The life of the quarry or proposed quarry, or, if there is more than one,the life of the quarry that has the longest estimated life

Worldwide Capital and Fixed Assets Guide 201823

Brazil
EY contacts
Frederico H. God+55 11 2573 3232
frederico.h.god@br.ey.com

Washington Coelho+55 11 2573 3446
washington.coelho@br.ey.com

Jose Paulo S. Peixe+55 11 2573 4379
jose.peixe@br.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
4%–100%Depreciation method used to calculate tax
deduction
Straight–line method

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Worldwide Capital and Fixed Assets Guide 2018

1. Entitlement to claim
The taxpayer that owns and uses fixed assets is entitled to claim depreciation costs (proof of ownership, possession or effective
use of the assets may be required).

2. Allocation of tangible assets to tax depreciation lives andrates
Segregation of assets is mandatory to control the depreciation individually, as different assets may have different rates, andtaxpayers need to demonstrate that no asset has been overdepreciated (i.e., exceeding its purchase value).
The Brazilian Internal Revenue Service (IRS) is the authority responsible for publishing the useful life and the depreciation rates
accepted for tax purposes. For accounting purposes, there is no consolidated table of assets and correspondent useful life; thus, itvaries by industry.

2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Plant, machinery andequipment (general)

10 years

Annual10%

The rate of depreciation
may vary according
to details and theBrazilian IRS ruling. The
depreciation rate varies
by industry. 3, 4, 5 or 10
years; 10%, 20%, 25%
or 33%.

Automobiles

5 years

Annual20%

The rate of depreciation
may vary according
to details and theBrazilian IRS ruling. The
depreciation rate varies
by industry. 4 or 5 years;
20% or 25%.

Buildings

25 years

Annual4%

Furniture, fittings or
fixtures (general)

10 years

Annual10%Computer hardware

5 years

Annual20%

Computer software

5 years

Annual20%

Aircraft

10 years

Annual10%

The rate of depreciation
may vary according
to details and theBrazilian IRS ruling. The
depreciation rate varies
by industry. 5, 10 or 25
years; 4%, 10% or 20%.

Worldwide Capital and Fixed Assets Guide 201825

Brazil

Asset type26

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Transportation other thanautomobiles or aircraft

The rate of depreciation
may vary according todetails of the asset andthe Brazilian IRS rules.
Depreciation will only
be permitted if the asset
is related to production
or commercialization of
goods and services. The
depreciation rate varies
by industry. 4, 5, 10 or
20 years; 5%, 10%, 20%
or 25%.

Car parks

Parking buildings may
apply for depreciationaccording to generalbuilding depreciation
rules.

Office equipment(including office furnitureand fixtures)

10 years

Annual10%

Qualified improvements inleasehold properties

1 year or more/lessthan 1 year

May vary

May vary

Improvements thatenhance the useful lifeof the property in morethan one year may be
depreciated with theremaining value of theasset. Improvementsthat do not enhance
the useful life in morethan one year must
be recognized as an
expenditure in the
period. Improvements inleasehold properties may
be amortized if related
to the manufacturing
or commercialization of
goods and services. The
amortization rate varies
as per the remaining
years of the right or
according to the period
in which they will beenjoyed, if related to an
intangible asset.

Machinery and equipmentused for agricultural
purposes

1 yearAnnual100%

Assets may be
depreciated at 100%
annual rate (accelerated
depreciation).

Property used in R&D

No specific rate for
R&D.

No specific rate for R&D. It follows
the regular asset depreciation.

No specific ratefor R&D. It follows
the regular asset
depreciation.

Assets have to be
depreciated separately
and might be subject toaccelerated depreciation
as a tax incentive in thefirst fiscal year.

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Brazil

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Long-term investment

Buildings rented or used for purposes other than manufacturing orcommercialization of goods and services

Not an operational asset

Assets whose value usually increases over time (e.g., art/antiques)

Not an operational asset

Assets to which exhaustion quote applies

Exhaustion has the same tax and accounting impacts as depreciation.
Exhaustion quotes are specific to the mining and forest assets’ usefullife, as these resources are exhausted, not depreciated. Although it is adifferent terminology, the principle is the same.

2.3 Noteworthy items
Pre-operational costs
Pre-operational costs and expenses must integrate into fixed-asset or intangible costs. If not related to fixed assets or intangibles,
they must be written off as an expense. Intangibles might be subject to amortization.
Pre-operational expenditures, such as training programs, administrative and sales, cannot integrate into the value of intangibles;
thus, they must be written off as expenses.

Leased assets
According to IRS Ordinance 1.700/2017, the deduction of depreciation, amortization, exhaustion and financial expenses
generated for leased assets is prohibited for corporate income tax purposes.
However, any consideration paid or credited under the leasing contract may be deducted on the computation of corporate income
tax.

Land remediation — removing asbestos
Depending on the specifics of the situation, the corresponding costs can be integrated to the fixed asset or written off as an
expense.

Labor costs applied to software design
If the company is a service provider and develops specific software to improve the performance of its services, the corresponding
labor costs can be integrated to the intangible value. Intangibles might be subject to amortization.

Other relevant matters
Repairs or improvements that do not enhance the useful life of an asset in more than one year must be written off as expenses inthe same fiscal year.
Tax depreciation can differ from the accounting depreciation of the financial statements while not imposing restrictions. However,
taxpayers might opt to use accounting over tax depreciation, if it is more tax beneficial.

2.4 Availability of immediate deductions for repairs
For tax purposes, it is possible to depreciate the following assets in the same year of acquisition:• Fixed assets used in agricultural activity• New machinery, equipment, apparatus and instruments used solely in activities of technological research and development(R&D incentive)

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Brazil

3. Depreciation and calculation methods
Methods used

The method referred to in tax legislation is the straight–line method. Nevertheless,there are different tax rates (not methods) related to specific regulations or based on
expert reports (e.g., accelerated depreciation of machinery and industrial equipmentused in two or three shifts).

Frequency

The depreciation rate is set on an annual basis. However, tax depreciation is calculated
on a monthly basis.

Year of acquisition

The depreciation rate is calculated upon the acquisition date. However, if the asset isassembled and installed after the beginning of the tax year, the depreciation rate isapportioned to the remaining months of the tax year.

Year of disposal

N/A

Ability to use different methods for different assets

Both tax and accounting methods apply to different types of assets. For tax purposes,
in order to use different depreciation rates from the ones set forth in the tax
regulation, there must be an expert’s report to support the case. There are different
methods only for accounting purposes.

Ability to switch methods

There are no different methods for tax purposes. Different rates may apply if there isan expert’s report to validate the use of machinery and industrial equipment in two or
three shifts (accelerated depreciation).

4. Preferential and enhanced depreciation availability
There are two kinds of accelerated depreciation set forth by tax law:
• Related to machinery and industrial equipment used in two or three daily production shifts• Accelerated depreciation for very specific machinery, equipment and vehicles set forth by tax law
Specific legislation has created certain tax benefits related to accelerated depreciation for very specific years, regions and types ofequipment.
Tax depreciation method

Comment on specific application and benefits available

Straight-line and accelerated depreciation

Agricultural machinery

Straight-line and accelerated depreciation

R&D — new machinery, equipment, apparatus and instruments, used solely for activities oftechnological research and development (R&D incentive)

Straight-line and accelerated depreciation

Fixed assets acquired or constructed by companies (e.g., public concessions)

Straight-line and accelerated depreciation

Vehicles for the transportation of goods, wagons and locomotives

5. Accounting for disposals
The residual value (i.e., the difference between the original cost of the asset and its depreciation) of an asset that is disposed must
be taken into account to determine the capital gain. If the asset’s sale price is higher than the residual amount, then the capitalgain is subject to corporate income tax. However, if it results in a capital loss, it is treated as a deductible expense for corporate
income tax purposes.
It is necessary to have supporting documentation to prove the disposal of the asset (e.g., minutes drawn up by a notary public
office).

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6. Making a claimTax deductions corresponding to asset depreciation should be claimed when filing the income tax return.
In order to prove that the tax depreciation calculation is being done properly and separately by asset, companies are required tokeep supporting documentation.

7. Intangible assets
Intangible assets are subject to amortization. There is specific legislation for every kind of intangible asset, such as goodwill,trademarks and licenses. The amortization rates of trademarks and licenses are related to the contracts/rights duration.
Goodwill is no longer subject to accounting amortization.
Type of asset

Rates/lives

Trademarks

Contingent on the contract/right duration

Patents, copyrights, design, know–how or similar items

Contingent on the contract/right duration

Goodwill

In-house goodwill is not deductible for tax purposes

Licenses or permits

Contingent on the contract/right duration

Other (please provide details)

N/A

The deductive expenditure of amortization is related to the contract period. Additionally, in-house trademarks, patents andcopyrights are not deductible.

Worldwide Capital and Fixed Assets Guide 201829

CanadaEY contacts
Allan Bonvie+902 421 6256
allan.bonvie@ca.ey.com

Brett Copeland+902 421 6261
brett.copeland@ca.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Capital cost allowance (CCA)
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
4%–100%Depreciation method used to calculate tax
deduction
Declining-balance, straight-line

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1. Entitlement to claim
Corporate and personal taxpayers, as well as partnerships that generate business or property income, are entitled to claim the
CCA.

2. Allocation of tangible assets to tax depreciation lives andrates
Details/descriptions of various CCA classes (including applicable declining–balance depreciation rate or straight–line depreciationlife) and the properties that qualify for them are listed in Schedule II of the Income Tax Regulations (Canada). Assets that arepurchased solely in support of equipment may be considered to be a part of that equipment and classified as such (e.g., heating,ventilation and air conditioning (HVAC); plumbing; electrical). This is not required but typically results in significantly moreadvantageous depreciation rates for the particular assets. In manufacturing and processing (M&P) situations, costs specificallyrelated to the M&P activities/processes may be classified separately from the building.

2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Plant, machinery andequipment (PME)

N/A

Declining-balance(DB)/straight-line (SL)depreciation methods

Various — seecomments

There are many CCA classes for PME,
the most common of which are Class 8(general equipment — 20% DB CCA rate),
Class 53 (M&P equipment — 50% DB CCArate) and Class 29 (M&P equipment —acquired before 2016).

Automobiles

N/A

DB

30%

Luxury passenger vehicles (those thatcost more than CAD30,000 and are
not used more than 90% for business)
are limited to a maximum CAD30,000
addition to CCA Class 10.1 and must beplaced in a separate class for each asset.
Passenger vehicles costing less than
CAD30,000 or used more than 90% forbusiness are recorded in one class anddepreciated at a rate of 30%.

Buildings

N/ADB

4%/6%/10%

Buildings initially qualify for 4% DB CCA
rate. Buildings with more than 90%
nonresidential usage (by square footage)
are depreciated at a 6% DB CCA rate;buildings with more than 90% M&P usage(by square footage) are depreciatedat a 10% DB CCA rate. Corrugatedmetal buildings with no footings orbase support below ground level are
depreciated at a 10% DB CCA rate.

Furniture, fittings

N/A

DB

20%

Computer hardware

N/A

DB

55%

Computer software

N/A

DB

55%/100%(half–year rule)

System software is depreciated at a 55%
DB CCA rate. Application software isdepreciated at a 100% DB CCA rate, but
half–year rule is applicable (see later).

Aircraft

N/A

DB

25%

Includes furniture and fittings attached
to aircraft

Worldwide Capital and Fixed Assets Guide 201831

CanadaAsset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Transport other thanautomobiles

N/A

DB

Various

Most automotive equipment isdepreciated at a 30% DB CCA rate.
Tractors designed for hauling freight are
40% DB CCA rate.

Car parking lots

N/A

DB

8%

Surface–constructed parking lots are
depreciated at an 8% DB CCA rate.

Office equipment(including officefurniture and fixtures)

N/A

DB

20%

Land improvements

N/A

DB or immediate deduction

Various DB rates or
expenseLandscaping is immediately deductible
in the year incurred. Other land
improvements incurred because of theinstallation of another asset (parking lot
drainage, drainage for building, utility
service trenching, etc.) would follow theclassification of the asset that required
the land improvement to be incurred.

Qualified leasehold
improvement property

Initial lease term
plus first renewal
period/option

SL

Initial leaseterm plus one
renewal period

This applies to leasehold improvement
costs incurred by a tenant.

Agricultural machineryand equipment

N/A

DB

20%/30%Automotive agricultural equipment is
30% CCA rate. Most other equipment will
be considered general equipment andhave a 20% CCA rate.

Property used in R&D

N/A

DB or SL

VariousNo special rules apply for R&D
equipment. Equipment type will dictate
depreciation rate. If R&D activity
supports M&P, the R&D property could
be considered M&P property. Other
equipment would follow classifications
set out above.

2.2 Assets that do not qualify for tax depreciation
Type of asset

Explanation

Land

Land does not qualify, as it is not depreciable property.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
These fees are generally considered to be included in the capital cost of an asset put into use. If they relate to more than one asset,
they would be allocated among the properties.

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CanadaLand remediation — removing asbestos, Japanese knotweed
No specific treatment for these items is given in legislation. See general principles set out in the repair discussion below. If a
taxpayer has owned land for a period of time and discovers it has become contaminated, and the taxpayer remediates the land
(restoring it to its original “clean” state), the related remediation costs would be deductible. If the taxpayer acquires land that was
already contaminated (known or unknown to the taxpayer) and he or she remediates the land, the related costs would be added tothe cost of the property/land.
Own labor capitalized — work on developing software, for example, or carrying out work on property
When a taxpayer manufactures or produces a property for his or her own use, the capital cost of the property includes material,labor and overhead costs reasonably attributable to the property. The capital cost excludes any profit that might have been earned
if the property had been sold. In most cases, generally accepted accounting principles (GAAP) are used to determine the cost.

2.4 Availability of immediate deductions
Description

DetailChinaware, cutlery or other tableware

100% DB CCA rate (not subject to half-year rule)

Kitchenware utensils costing less than CAD500

100% DB CCA rate (not subject to half-year rule)

Medical or dental instruments costing less than CAD500

100% DB CCA rate (not subject to half-year rule)Linens100% DB CCA rate (not subject to half-year rule)

Tools costing less than CAD500

100% DB CCA rate (not subject to half-year rule)

Uniforms

100% DB CCA rate (not subject to half-year rule)

Apparel or costumes used for the purpose of earning income

100% DB CCA rate (not subject to half-year rule)

Repairs and maintenance expenditures

Repairs and maintenance expenditures that restore an asset to its original
condition and do not create an enduring benefit to the taxpayer — replacing acomponent part of a larger asset, etc. — can be immediately deductible for tax
purposes.

There is no legislation that details what a repair is; however, this has been addressed through much case law. There are also
administrative positions that have been published by the Canada Revenue Agency (CRA). The courts have held that thedetermination of capital vs. expense is based on ordinary commercial principles and must be evaluated on a case–by–case basis.
CRA’s administrative guidelines with respect to the determination of what constitutes a capital or current (repair) expenditure areindicated in the following key factors/criteria:• Enduring benefit — does the expenditure bring into existence an asset or advantage?
• Maintenance or betterment — does it result in more than the restoration of an asset to its original condition?
• Integral part or separate asset — is the expenditure a repair or an acquisition of a separate asset?
The CRA guidelines/administrative position have been developed from the extensive body of case law that addresses whether an
expenditure is on account of capital or an immediately deductible repair.
There are different guidelines/criteria for repairs and maintenance for tax purposes (based on case law principles) and accounting
purposes (based on accounting standards). Any differences are reconciled in the calculation of taxable income for a period. Caselaw also indicates when evaluating an expenditure as capital or current in nature for tax purposes, the accounting treatment canbe looked to as an interpretive aid and no more.
If a business adopts a capitalization threshold, such as an asset below CAD1,000, it will be expensed for accounting purposes. CRA
would typically accept this practice for tax purposes provided it is aligned with the accounting treatment.

Worldwide Capital and Fixed Assets Guide 201833

Canada3. Depreciation and calculation methods
Methods used

Declining-balance, straight-line

Frequency

Annually, CCA is calculated for each taxation year when the annual tax/partnership return is filed. For
short taxation years, the depreciation/CCA claim is prorated on the number of days in the taxation year
out of 365. Assets that are classified in the same CCA class are typically grouped together in one pool(besides specific classes, such as some automotive equipment, rental properties costing more than
CAD50,000, 6%/10% buildings where the taxpayer files an election, etc.), and CCA is claimed on theentire pool of assets.

Year of acquisition

In the year of acquisition, most properties are subject to a half–rate rule, i.e., 50% of the class regular
CCA rate.
CCA is only calculated on the assets remaining in the CCA class/pool at year-end, so in the year of
disposal, there is no CCA calculated on an asset that is disposed of.

Ability to use different methods fordifferent assets

Yes. The method is laid out by tax legislation (regulations).

Ability to switch methods

Yes, misclassified property can be reclassified. Also, there are rules that allow classes to be combined
when a certain property was acquired under one class, more additions were made under a new legislatedclass and assets are sold from both classes.

4. Preferential and enhanced depreciation availability
Type of asset

Comment on specific application and benefits available

M&P machinery and equipment

Depreciated on a three–year, straight–line basis (25%/50%/25%) for assets purchased before 2016.
Assets purchased after 2015 and before 2026 will be depreciated on a 50% declining-balance basis.

Energy-efficient assets, such as
solar, wind, large–scale hydro,
geothermal projects, etc.

Available to be depreciated at a 50% declining–balance rate if purchased after 22 February 2005 andbefore 2020. The 2018 federal budget extended this to 2025.

Computer hardware

Computer hardware (electronic data processing equipment) and peripheral equipment (ancillary dataprocessing equipment) is depreciated at a 55% DB CCA rate.

Computer software

System software is depreciated at a 55% DB CCA rate. Application software is depreciated at a 100% DB
CCA rate, but half–year rule is applicable (see later).

Investments in qualified M&P equipment in certain areas of the country are eligible for either a provincial or federal investment tax
credit (typically 4%–15% of the cost of the asset). There are various other investment tax credits available provincially across thecountry (e.g., green–energy equipment in Manitoba; digital media tax credit in Nova Scotia, Ontario and Newfoundland).

5. Accounting for disposals
As discussed above, most property/asset CCA classes are made up of pools of similar assets. When an asset is disposed of, the poolvalue is reduced by the lesser of the original cost of the asset or the proceeds of disposition, and CCA is calculated on the resulting
net/adjusted pool balance.
If the last asset in a pool/class is disposed of, there is an income inclusion if the resulting pool balance is negative (called“recapture”) or an additional deduction if the resulting pool balance is positive (called a “terminal loss”) after deducting the lesserof the original cost or proceeds from the pool value.
No adjustments/deductions are available if a company scraps an asset for no value.

34

Worldwide Capital and Fixed Assets Guide 2018

Canada6. Making a claim
Depreciation/CCA claims are made by filling out Schedule 008 of the Corporation Income Tax or Partnership Return. This schedule
calculates the current year CCA claim by factoring in opening pool balances, additions, disposals and adjustments. This amount isthen deducted in calculating net income for tax purposes/taxable income elsewhere in the return.
Supporting documentation must be retained by the taxpayer for all tax returns filed (whether electronically or on paper) for aperiod of seven years after the end of the taxation year, although there is no supporting documentation required to be sent alongwith the tax return when it is filed.

7. Intangible assets• Unless specifically permitted to be deducted in Part I of the Income Tax Act (Canada), all amounts on account of capital are
nondeductible. There are specific CCA classifications/deductions for some limited–life intangible assets as detailed in the tablebelow.
• There is also a deduction available for eligible capital expenditures (ECE), which are expenditures made with respect to abusiness, made on account of capital, for the purpose of gaining or producing income not otherwise deductible under aspecific provision of the Income Tax Act (Canada) and not included in the cost of tangible, corporeal, intangible or incorporeal
property of the taxpayer. Examples of ECEs include goodwill, customer lists, trademarks, farm quotas, franchises, concessions
and licenses of indeterminate duration. Prior to 2017, ECE expenditures were deducted by adding 75% of the capital cost of
the ECE to a pool that was depreciated at a 7% declining–balance depreciation rate. Effective 1 January 2017, 100% of these
expenditures are added to CCA Class 14.1 and deducted at a 5% declining-balance depreciation rate with transitional rules
applying for the transfer of the pre-2017 ECE pool to the new Class 14.1.
Type of asset

Rates/lives

Trademarks

CCA Class 14.1 — as noted above, 5% CCA rate.

Patents, copyrights, design, know–how or similar items

Patents are depreciated over the useful life of the asset — Class 14 (limited life).
Patents may also be Class 44 property — 25% CCA rate.

Goodwill

CCA Class 14.1 — as noted above, 5% CCA rate.

Licenses or permits

Licenses are depreciated over the useful life of the asset — Class 14 (limited life).

Worldwide Capital and Fixed Assets Guide 201835

ChinaEY contact
Chuan Shi

+86 21 2228 4306
chuan.shi@cn.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
5.00%–33.33%
Does the tax treatment follow book/statutory accounting depreciation?
Straight–line method

36

Worldwide Capital and Fixed Assets Guide 2018

1. Entitlement to claim
Legal owners or the lessee of a finance lease

2. Allocation of tangible assets to tax depreciation
lives and rates
Accounting Standards for Business Enterprises No. 4 — fixed assets
The component parts of a fixed asset have different useful lives or provide economic benefits for the enterprise in different forms,
and to which different depreciation rates or depreciation methods apply. As such, they are recognized as fixed assets on an
individual component part basis.
The cost of a purchased fixed asset includes the purchase price, relevant taxes, freight, loading and unloading fees, professional
service fees, and other disbursements that bring the fixed asset to the expected conditions for use and that may be attributed to
the fixed asset.
If a payment is made for purchasing several fixed assets that are not priced separately, the price of each fixed asset shall be
determined by allocating the payment according to the proportion of fair value of each fixed asset to the total cost of all assets
acquired.
If a payment for a fixed asset is delayed beyond the normal credit conditions, and it is of financing nature in effect, the cost of the
fixed asset shall be determined on the basis of the current value of the purchase price. The difference between the actual payment
and the current value of the purchase price shall be recorded in the current profits and losses within the credit period, unless it
shall be capitalized under Accounting Standards No. 17 — Borrowing Costs.
Unless otherwise prescribed in the regulations of the competent finance and taxation departments under the State Council, theminimum term of calculating the depreciation of the fixed assets are as follows.

2.1 Assets that qualify for tax depreciation
Generally speaking, if the amount of accounting depreciation is less than the tax depreciation, the tax depreciation is limited to theamount of accounting depreciation calculated by asset.
Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Houses and buildings

20 years

Airplanes, locomotives,
ships, machines andother production
facilities

10 years

Apparatus, tools andfurniture in connection
with the production
operation

5 years

Transportation facilities
other than airplanes,
locomotives and ships

4 years

Electronic equipment

3 years

Land and buildings

20 years

Straight–line method

5%Land is usually considered an intangible
asset in form of land use right in China.

Plant, machineryand equipment

10 years

Straight–line method

10%Worldwide Capital and Fixed Assets Guide 201837

ChinaAsset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Motor cars

4 years

Straight–line method

25%

Buildings

20 years

Straight–line method

5%

Furniture, fittings or
fixtures

5 years

Straight–line method

20%

Computer hardware

3 years

Straight–line method

33.33%

Computer software

10 years

Straight–line method

10%

Aircraft

10 years

Straight–line method

10%

Transport other thanmotor cars

4 or 10 years

Straight–line method

25% or 10%

Depending on the type oftransportation facility

Car parks

20 years

Straight–line method

5%

Assuming it is a building

Office equipment(including officefurniture and fixtures)

3 or 5 years

Straight–line method

33.33% or 20%

Depending on whether such officeequipment could be considered aselectronic equipment

Land improvements

Depending on accounting treatment; iftreated as land cost, such improvement
shall be amortized based on theremaining land-use term.

Qualified leaseholder
improvement property

Based onremaininglease term

Straight–line method

Agricultural machineryand equipment

5 years

Straight–line method

Property used in R&D

Straight–line method

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Fixed assets, other than houses andbuildings, that have not yet been used
Fixed assets leased from other parties bymeans of operating lease
Fixed assets leased to other parties bymeans of finance lease
Fixed assets that have been depreciated infull but are still in use
Fixed assets that are unrelated tobusiness operating

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Follow accounting treatment

Land remediation — removing asbestos, Japanese knotweed
Follow accounting treatment

38

Comments

Worldwide Capital and Fixed Assets Guide 2018

Depends

The improvement shall have the effect ofchanging building structure or prolonging
useful life.

May be qualified for super deduction(see below)

ChinaOwn labor capitalized — e.g., work on developing software or carrying out work on property
Follow accounting treatment

Accounting Standards for Business Enterprises No. 4 — Fixed Assets
According to Article 8, the cost of a purchased fixed asset includes the purchase price, relevant taxes, freight, loading andunloading fees, professional service fees, and other disbursements that bring the fixed asset to the expected conditions for use
and that may be attributed to the fixed asset.
If several fixed assets are purchased for a combined price, the price of each fixed asset will be determined by allocating thepayment according to the proportion of fair value of each fixed asset to the total cost of all assets acquired.
If the payment for a fixed asset is delayed beyond the normal credit conditions (e.g., through a finance arrangement), the costof the fixed asset will be determined by the basis of the current value of the purchase price. The difference between the actual
payment and the current value of the purchase price will be recorded in the current profits and losses within the credit period,
unless it is capitalized under Accounting Standards No. 17 — Borrowing Costs.

2.4 Availability of immediate deductions for repairs
According to Article 13, in the computation of taxable income, the following expenses incurred by an enterprise as long–term
deferred expenses and computed in accordance with relevant provisions may be deducted:• Reconstruction expenses for fixed assets that have been depreciated in full
• Reconstruction expenses for fixed assets leased from other parties• Expenses for material repair of fixed assets are not necessary
According to Article 68, the expenditures arising from reconstructing the fixed assets mean the expenditures that the enterprise
has paid for changing the structure of house/building and extending the lifetime of house/building.
Expenditures relating to owned assets will be amortized in stages as per the estimated lifetime of the fixed assets. Expenditures
relating to leased assets will be amortized by stages as per the remaining lease term stipulated in the lease contract.
If the reconstruction of fixed assets extends their lifetime, besides being subject to the provisions of Item 1 and Item 2 of Article
13 of Enterprise Income Tax Law, their term of depreciation shall be extended.
According to Article 69, expenditures arising from overhauling fixed assets, as indicated in Item 3 of Article 13 of the Enterprise
Income Tax Law, mean expenditures that meet the following conditions:• A repair expenditure reaching 50% or more of the taxation basis of acquiring the fixed assets• An extension of over two tears of the lifetime of the overhauled fixed assets
For the expenditure prescribed in Item 3 of Article 13 of Enterprise Income Tax Law, it will be amortized by stages as per theremaining lifetime of the fixed assets.
The deductions will be consistent with the accounting treatments adopted in financial information, e.g., tax deduction cannot betaken for items that have been capitalized on book.

Worldwide Capital and Fixed Assets Guide 201839

China3. Depreciation and calculation methods
Methods used

Straight–line method, unit–of–production method, double-declining-balance method and sum–of–the–years–digits method could be eligible for qualified accelerated depreciation (see below)

Frequency

Monthly

Year of acquisition

The depreciation of fixed assets can be calculated from the month after the fixed assets are put into use.

Year of disposal

The calculation of the depreciation stops the month following when the fixed assets ceases to be used.

Ability to use different methods fordifferent assets

Subject to qualified accelerated depreciation (see below)

Ability to switch methodsNo

Law of China on Enterprise Income Tax
According to Article 32, where the fixed assets of enterprises require accelerated depreciation due to technology advancement,
the years of depreciation may be shortened, or the accelerated depreciation method may be adopted.

Circular of the State Administration of Taxation on Issues Concerning the Treatment of Income Tax on
Accelerated Depreciation of Enterprise Fixed Assets (Guoshuifa [2009] No.81)
According to Article 1, in accordance with the relevant provisions of Article 32 of the Enterprise Income Tax Law and Article
98 of the Implementing Regulations, if the major or key fixed assets of an enterprise possessed and used for production andoperation by the enterprise need to be depreciated in an accelerated rate due to the following reasons, it may curtail the term ofdepreciation or adopt a method for accelerated depreciation:• Where the products are replaced and upgraded due to technological progressOr• Where the fixed assets are in a state of vibration and being exposed to a high degree of erosion
According to Article 5, where an enterprise needs to curtail the term of depreciation or adopt a method for accelerated
depreciation for any of its fixed assets, it shall, within one month after acquiring such fixed asset, file with the competent tax
authority in charge of it (hereinafter referred to as competent tax authority) for the record, and submit the following materials:• Statement of reasons why the functional and estimated service life of the fixed asset is shorter than the minimum number ofyears prescribed in the Implementing Regulations for depreciation, plus certificates and explanations of relevant situations• Explanations of the situations concerning the functions, usage and disposal of the old fixed asset replaced• The method to be adopted for the accelerated depreciation of the fixed asset and the explanation for depreciation• Other materials as required by the competent tax authority
The competent tax authority in charge of the enterprise shall, when conducting annual assessment on enterprise income tax,
carry out on-site inspection on the service environment and conditions of the fixed assets that have been depreciated at anaccelerated rate by the enterprise. For those that fail to meet the prescribed requirements for accelerated depreciation, thecompetent tax authority shall have the right to request the enterprise suspend the accelerated depreciation of such fixed asset.

Notice regarding the improvement of corporate income tax (CIT) policies on accelerated depreciation of fixed
assets (Caishui [2014] No. 75)• Accelerated depreciation treatments are applicable to six specific industries. Enterprises engaging in the following six industries
may adopt a shortened depreciation life or accelerated depreciation methods for CIT purposes for fixed assets acquired on orafter 1 January 2014:• Manufacturing of biopharmaceuticals• Manufacturing of special equipment• Manufacturing of transportation equipment for railway, shipping, aviation, aerospace and other conveying units

40

Worldwide Capital and Fixed Assets Guide 2018

China• Manufacturing of computers, telecommunication and other electronic equipment• Manufacturing of instruments and meters• Information transmission, software and information technology services
Small and micro-sized enterprises engaging in the above six industries are allowed to claim a deduction for CIT purposes in one gofor devices and equipment with unit value not exceeding RMB1 million that are acquired on or after 1 January 2014 and used forresearch and development (R&D), as well as production and business operations; these enterprises would no longer be required
to depreciate the aforesaid fixed assets over their useful lives. For those fixed assets with unit value exceeding RMB1 million, theabove enterprises may adopt a shortened depreciation life or accelerated depreciation methods for CIT purposes.
• Accelerated depreciation treatments applicable to R&D projects
Enterprises in various industries are allowed to claim a deduction for CIT purposes in one go for devices and equipment with unit
value not exceeding RMB1 million that are acquired on or after 1 January 2014 and used for R&D purposes only; enterprises
would no longer be required to depreciate these fixed assets over their useful lives. For those fixed assets with unit value
exceeding RMB1 million, they may adopt a shortened depreciation life or accelerated depreciation methods for CIT purposes.
• Accelerated depreciation treatments applicable to fixed assets with unit value not exceeding RMB5,000Enterprises under various industries are allowed to claim a deduction for CIT purposes in one go for their fixed assets with unit
value not exceeding RMB5,000. Enterprises would no longer be required to depreciate these fixed assets over their useful lives.
• Applicable minimum depreciation period and accelerated depreciation methods
For the above enterprises that are allowed to adopt a shortened depreciation life applicable to the six specific industries andR&D projects, the applicable minimum depreciation period shall not be shorter than 60% of the depreciation period stipulated
in Article 60 of the Implementation Regulations on the CIT Law (CITLIR) as mentioned above. For those enterprises that areallowed to adopt accelerated depreciation methods, the double-declining-balance method and sum-of-years-digits method canbe adopted.

Notice regarding the further improvement of CIT policies on accelerated depreciation of fixed assets (Caishui[2015] No. 106)
Enterprises engaging in four key industries — textile, machinery, automobile and light — may adopt a shortened depreciation life or
accelerated depreciation method for CIT purposes for fixed assets acquired on or after 1 January 2015.
Small and micro-sized enterprises engaging in the above four industries are allowed to claim a 100% up-front deduction withrespect to depreciation for CIT purposes for devices and equipment with a unit value not exceeding RMB1 million that wereacquired on or after 1 January 2015 and used for research and development (R&D), as well as production and business
operations; these enterprises would no longer be required to depreciate the aforesaid fixed assets over their useful lives.
For fixed assets with a unit value exceeding RMB1 million, the above enterprises may choose to adopt a shortened depreciation life
or apply an accelerated depreciation methods for CIT purposes.
For eligible enterprises that choose to adopt a shortened depreciation life applicable to the four key industries mentioned above,the minimum depreciation period shall not be shorter than 60% of the depreciation period stipulated in CITLIR. For enterprisesthat choose to adopt accelerated depreciation methods, either the double-declining-balance method or the sum-of-years-digits
method can be used.

Worldwide Capital and Fixed Assets Guide 201841

China4. Preferential and enhanced depreciation availability
Investment in R&D equipment may be rewarded by an enhanced depreciation at 150% of the original cost.
If an enterprise is engaged in qualified R&D activities, they may qualify for a super–deduction (enhanced depreciation by increasing
the calculation base) for devices and facilities used specifically for research and development activities.
“R&D activities” refer to activities with clearly defined purposes continuously and systematically carried out to obtain new science/technology knowledge, including:• Applying new science/technology knowledge in an innovative mannerOr• Improving current technologies, products/services or techniques substantially
The following industries are not eligible for the super deduction:• Tobacco• Accommodation and catering• Wholesale and retail• Real estate• Leasing and commercial service• Entertainment• Other industries as specified by the Ministry of Finance (MOF) or State Administration of Taxation (SAT)The following seven types of activities are excluded from applicable scope of the super deduction policy:• Routine upgrades of products/services• Simple application of R&D results, such as direct application of public techniques, materials, devices, products, services,knowledge, etc.
• Technical support to the customers after the commoditization• Repeated or simple changes made to existing products, services, technologies, materials or processes• Research on market, efficiency or management• Regular quality control, test and analysis, repairs and maintenance• Research on social sciences, arts or humanities

5. Accounting for disposals
Asset losses incurred by an enterprise due to normal abandonment and disposal of fixed assets reaching or exceeding the service
life could be claimed as a deduction. A declaration is required to be made to the tax authority. A gain on disposal of an asset will be
subject to corporate income tax as part of taxable income.

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Worldwide Capital and Fixed Assets Guide 2018

China6. Making a claimTax depreciation is incorporated into the tax return. No special procedures are required for a deduction.
Form A105080 of annual CIT filing return shows the calculation for tax and accounting depreciations. For accelerated
depreciation, Appendix 1 of quarterly CIT filing return shall be submitted. No other documentation is required by the tax authority.
However, supporting documents such as invoices should be kept by management for further examination.

7. Intangible assets
Implementing regulations of the law of China on enterprise income tax
Amortized expenses calculated as per the straight–line method for intangible assets may be deducted. The term of amortization
for the intangible assets shall be no less than 10 years.
For the intangible assets used as investment or transferred intangible assets, if the term of validity is prescribed by the relevantlaws or the agreement/contract, the amortization may be calculated in stages based on the term of validity.
For purchased software, the term could be shortened to two years subject to specific application.
Type of asset

Rates/lives

Trademarks

10 years or actual term of validity

Patents, copyright, design, know–how or similar item

10 years or actual term of validity

GoodwillCannot be amortized

License or permit

10 years or actual term of validity

Other (please provide details)

According to Article 65, the intangible assets indicated in Article 12 of the Enterprise Income Tax Law mean the nonmaterial andnon–currency long–term assets that the enterprise has possessed for producing the commodities; providing labor service; leasing;or managing, including the patent right, the trademark privileges, the copyright, the land-use right, the non–patent technology
and the credit.

Worldwide Capital and Fixed Assets Guide 201843

FinlandEY contacts
Marcel Sikkema+46 73 340 77 82
marcel.sikkema@se.ey.com

Harri Pettersson+35 84 055 61921
harri.pettersson@fi.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
N/A
Does the tax treatment follow book/statutory accounting depreciation?
Not directly, but it is not possible to makelarger depreciations in taxation than foraccounting. However, some repairs canbe deducted for tax purposes as annual
costs, although costs would be activated inaccounting.
Range of rates used
0%–25%
Depreciation method used to calculate tax
deduction
Straight-line method, declining-balancemethod and depletion allowance method forextractable soil resource areas

44

Worldwide Capital and Fixed Assets Guide 2018

1. Entitlement to claim
All companies and other entities subject to the Business Tax Act are entitled but not required to claim depreciation from theirtaxable business income for the financial year. Entities can apply changes afterward to their depreciation deductions if thedepreciation method has been incorrect by submitting appeal to the Tax Administration. Appeal must be filed with the Tax
Administration within five years from the beginning of the calendar year following the assessment. As of tax year 2017, the period
to appeal is three years from the beginning of the calendar year following the assessment.

2. Allocation of tangible assets to tax depreciation lives andrates
2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Comments

Plant, machinery andequipment

Declining-balance method

Maximum 25%

Can be deducted immediately
if useful life of the asset ismaximum three years or
acquisition cost is maximum€850 (total maximum €2,500
per tax year)

Buildings

Declining-balance method

Maximum 7%: stores,
warehouses, factories,
agricultural buildings,
power stations and othersimilar buildings
Maximum 4%: residentialbuildings, offices andother similar buildings
Maximum 20%: fuel andacid containers and othersimilar metal constructed
storages or otherstructures
Maximum 20% if building
is used only for research
activities aiming topromote businessactivities

Furniture, fittings or
fixtures

Declining-balance method

Maximum 25%

Can be deducted immediately
if useful life of the asset ismaximum three years or
acquisition cost is maximum€850 (total maximum€2,500 per tax year). Includedin plant, machinery andequipment when depreciatedComputer hardware

Declining-balance method

Maximum 25%

Can be deducted immediately
if useful life of the asset ismaximum three years or
acquisition cost is maximum€850 (in total maximum€2,500 per tax year). Computer
hardware is included in plant,
machinery and equipment when
depreciated.

Worldwide Capital and Fixed Assets Guide 201845

Finland

Asset type

Useful life for tax

Type of tax
depreciation method

Computer software

Maximum 10 years

Straight-line method

Applicable tax
depreciation rate

Comments
Can be deducted immediately
if useful life of the asset ismaximum three years

Aircraft

Declining-balance method

Maximum 25%

Included in plant, machineryand equipment

Transport other thanmotor cars

Declining balance method

Maximum 25%

Included in plant, machineryand equipment

Motor cars

Declining-balance method

Maximum 25%

Included in plant, machineryand equipment

Car parks

Declining-balance method

Included in buildings
Applicable tax depreciation rateis assessed based on casespecific factors.

Office equipment(including officefurniture and fixtures)

Declining-balance method

Maximum 25%

Included in plant, machineryand equipment

Agricultural machineryand equipment

Declining-balance method

Maximum 25%

Included in plant, machineryand equipment

2.2 Assets that do not qualify for tax depreciation
Types of assets

ExplanationLand

Is classified as non-wearing fixed asset

Securities

Are classified as non-wearing fixed assets

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Expenses that will accumulate income for three or more years are activated and depreciated with straight-line method in maximum
10 years.

Land remediation — removing asbestos, Japanese knotweed
Upgrading, alteration, extension, reforming and other similar costs are included in asset’s residual value. Expenses from smaller
repairs are deducted immediately.

Own labor capitalized
If own labor is used in upgrading, alteration, extension or reforming, costs are included in residual value. Otherwise, expenses are
deducted immediately.

46

Worldwide Capital and Fixed Assets Guide 2018

Finland

2.4 Availability of immediate deductions for repairs
Description

DetailRepairs

If not upgrading, alteration, extension or reforming, repair costs are deducted immediately. Also, fairly big
repair costs can be deducted in taxation immediately if requested by taxpayer even though they were activatedin accounting.

Items of a revenue nature

If not upgrading, alteration, extension or reforming, repair costs are deducted immediately.

3. Depreciation and calculation methods
Methods used

Straight-line method, declining-balance method and depletion allowance method forsoil resource areas

Frequency

Once per tax year. Tax year equals calendar year. If taxpayer’s accounting period
differs from tax year, the tax year is the accounting period or periods that have ended
during that calendar year.

Year of acquisition

Asset is started to be depreciated when it is put in use.

Year of disposal

When asset is put out of use

Ability to use different methods for different assets

The asset class determines the applicable depreciation method in taxation.

Ability to switch methods

The asset class determines the applicable depreciation method in taxation.

4. Preferential and enhanced depreciation availability
Asset used inComment on specific application and benefits available

Production of biofuels, oil and gas
exploration, production of electric energy,
production of bioethanol, employmentof renewable energy sources for theobtainment of electric energy

No benefits

MiningNo benefits. Depletion allowance method for depreciation of extractable soil resource areas

Forestry

Private investors and jointly owned forests both get preferential treatment. Corporations do not
get preferential treatment.

Production of biotechnology

No benefits

Environmental investments

If considered as qualifying investments, they can be depreciated in four years.

5. Accounting for disposals
When an asset is disposed, its value is reduced to zero in the company’s accounting. If disposing includes higher write-downs thanmaximum depreciation in taxation, the taxpayer has to prove that asset would not have had any resale or operating value to beable to deduct the write-down in taxation. If the asset were part of machinery and fixtures, the whole amount of this asset class’(movable assets) value should be zero to justify a write-down to zero in taxation.

Worldwide Capital and Fixed Assets Guide 201847

Finland

6. Making a claim
Taxpayers can apply alterations afterward to their taxation by submitting appeal to Tax Administration. Appeal must be filed within
five years from the beginning of the calendar year following the assessment. As of tax year 2017, the period to appeal is three
years from the beginning of the calendar year following the assessment.

7. Intangible assets

48

Type of asset

Rates/lives

Trademarks

Straight-line method in its useful life in maximum 10 years

Patents, copyright, design, know-how or similar item

Straight-line method in its useful life in maximum 10 years

Goodwill

Straight-line method in its useful life in maximum 10 years

License or permit

Straight-line method in its useful life in maximum 10 years

Worldwide Capital and Fixed Assets Guide 2018

France

FranceEY contacts
Xavier Dange+33 1 55 61 11 28
xavier.dange@ey-avocats.com

Artur Prodan+33 1 55 61 17 18
artur.prodan@ey-avocats.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets“Tax depreciation” or “depreciation for tax
purposes”
Does the tax treatment follow book/statutory accounting depreciation?
Yes
Range of rates used
4%–50%
Depreciation method used to calculate tax
deduction
Declining-balance (amortissement
dégressif), straight-line, other accelerated
or exceptional methods

Worldwide Capital and Fixed Assets Guide 201849

France

1. Entitlement to claim
As a matter of principle, the taxpayer is entitled to claim depreciation on assets that are owned. In case of the lease of the asset,
the legal owner (the lessor) is entitled to claim depreciation.
An asset can be depreciated as from its entry into service/use under the straight-line method and as from its acquisition/
construction date under the declining-balance method.

2. Allocation of tangible assets to tax depreciation lives andrates
The depreciation of fixed assets must be carried out component by component if these components have different lifetimes or ifthey provide economic benefits to the owner over different time scales. In this situation, they have to be depreciated separately,according to the lifetime of each of them (e.g., heating system or roofing, which are both by nature and their use intended to be
replaced at regular intervals).
The French tax authorities have provided — for informational purposes only — a list of the most commonly accepted depreciation
rates for some assets (see below).

2.1 Assets that qualify for tax depreciation
The French tax authorities provide a list of the most commonly accepted depreciation rates for the most common asset types. This
list is for informational purposes only.

50

Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax depreciation
rate

Plant, machinery andequipment

Between 5 and 10
years

Straight–line basis

Between 10% and 20%

Motor cars

Between 4 and 5 years

Straight–line basis

Between 20% and 25%

Industrial buildings

20 years

Straight–line basis

5%

Furniture

Between 5 and 10
years

Straight–line basis

Between 10% and 20%

Computer hardware

3 years

Straight–line basis

33.33%

Computer software

Life of the software

Straight-line basis

Depends on life of thesoftware

Office building

Between 20 and 50
years

Straight–line basis

Between 2% and 5%

Transport other thanmotor cars (materielroulant)

Between 4 and 5 years

Straight–line basis

Between 20% and 25%

Tools/equipment

Between 5 and 10
years

Straight–line basis

Between 10% and 20%

Worldwide Capital and Fixed Assets Guide 2018

Comments

41.67% rate can beapplied if decliningbalance method is used.

If used for scientificand technical research,tools/equipment may
be depreciated on an
accelerated decliningbalance basis. The
acceleration multiples inthis case range from 1.5
to 2.5.

France

Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax depreciation
rate

Comments

Office equipment(including office furnitureand fixtures)

Between 5 and 10
years

Straight–line basis

Between 10% and 20%

To be immediately
deducted as expenses if
the acquisition price ofthe equipment does notexceed EUR500.

Property used in R&D(patents)

5 years

Straight–line basis

20%

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Land does not qualify for any tax depreciation, because there is no foreseeable limit to
the period during which the land will provide economic benefits to the company.

Goodwill (Fond commercial)

It is not subject to any decrease in value by the effect of time.

Leasehold right

It is not subject to any decrease in value by the effect of time.

Ongoing (Fonds de commerce)

In principle, it is not subject to any decrease in value by the effect of time.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
The preliminary cost (frais d’établissement) and in particular legal fees, notary fees and legal formalities expenses can either be
immediately deducted for tax purposes or be amortized over a five-year period.

Removing asbestos
May be amortizedOwn labor capitalized — work on developing software, for example, or carrying out work on property
May be amortized

2.4 Availability of immediate deductions for repairs
Description

DetailAcquisition cost of software

From a tax perspective, acquisition cost of software made until 31 December 2016 may beamortized over a period of 12 months. It is no longer possible for software acquired in fiscal
years beginning on or after 1 January 2017.

As a matter of principle, expenditures that do not aim at replacing identified components, that are not the subject of a multiannual
program of major maintenance, that do not result from compliance for security reasons or that are not specific spare parts ofa fixed asset can be immediately deducted for tax purposes. Otherwise, the expenditures must be recorded as an asset and beamortized (carpentry works, masonry, etc.).

Worldwide Capital and Fixed Assets Guide 201851

France

3. Depreciation and calculation methods
Methods used

Straight-line is the typical method. Declining-balance (amotissement degnessif)is allowed for certain types of new or recovered assets — for example, handlingequipment, central heating, plants. The assets must have a useful life in excess of
three years.

Frequency

Annually

Year of acquisition

Straight-line depreciation is calculated proportionately in the year of acquisition, fromthe date the asset enters in to use. The computation is based on the number of days
in use.
If the declining-balance method is used, depreciation is calculated from the first day ofthe month in which the asset was purchased.

Year of disposal

Depreciation is prorated in the year of disposal from the beginning of the financial
period to the date of disposal. The calculation is based on the number of days. For
declining-balance, depreciation is prorated as from the beginning of the financial
period to the beginning of the month of the disposals.

Ability to use different methods for different assets

The decision made by a company to depreciate an asset on a straight–line, declining–balance or exceptional method constitutes a binding management decision.
As a result, after having made that choice, the company cannot ask to substituteone method for another. Depreciation is prorated in the year of disposal from the
beginning of the financial period to the date of disposal. The calculation is based on
the number of days.

Ability to switch methods

No

Declining-balance method rate
The constant rate of the declining balance is obtained by multiplying the straight-line rate by a coefficient that varies according
to the depreciation duration. The coefficients are 1.25 for a depreciation duration of three or four years, 1.75 for a depreciation
duration of five or six years, and 2.25 for a depreciation duration longer than six years.

4. Preferential and enhanced depreciation availability
Equipment and tools mainly used for R&D operations may benefit from an accelerated depreciation. The depreciation is increased
with reference to coefficients. The applicable coefficients are 1.5, 2 and 2.5, depending on the standard duration of amortizationof the equipment or the tools for tax purposes.
Equipment designed to save energy and equipment for the production of renewable energies can benefit from an accelerated
depreciation. The applicable coefficients are 2, 2.5 and 3, depending on the standard duration of amortization of the equipment
or the tools for tax purposes.
Investment in robotics between 1 October 2013 and 31 December 2016 may be depreciated on a two-year basis. Assets that
benefited from equipment grants before 2006 can be also depreciated under a specific tax regime.
Investments on 3D printers between 1 October 2015 and 31 December 2017 by small and medium companies (qualified as suchaccording to EU law) may be depreciated on a two-year basis.
Small and medium companies that built commercial or industrial real estate in specific urban zones before 1 January 2016 may
depreciate the asset by 25% the first year after the construction is finished. The subscription to the capital of innovative small andmedium companies allows the depreciation of the shares on a five-year period.

52

Worldwide Capital and Fixed Assets Guide 2018

FranceCompanies that purchase, lease or manufacture some goods that qualify for the declining-balance method (amotissement
degressif) can claim an additional special super-deduction on the original value of these goods. These goods must have beenpurchased, leased or manufactured between 15 April 2015 and 14 April 2017. The tax deduction is equal to 40% of the originalvalue of the good and is allocated over the normal period of use. This deduction is applicable to goods acquired after 15 April
2017 with three conditions: the good has to be ordered before this date, the purchaser provides a 10% deposit at the date of theorder, and the good has to be acquired within 24 months of the order. The special deduction reduces the base of the corporate
income tax (CIT).

5. Accounting for disposals
On disposal, the company must remove the asset from the balance sheet.
When preparing the computation, the capital gain should be equal to the difference between the sale price of the asset and theamount of its net book value. There are no specific consequences from an accounting standpoint if a loss arises.
In this case, no adjustment can be made if the asset is scrapped for no value.

6. Making a claim
From a practical standpoint, the decision regarding the choice of the depreciation method results in general of the statements
made in the depreciation Form No. 2055 attached to the CIT return.
Supporting documentation is needed to book the asset in the balance sheet in order for it to be amortized later (for example, thepurchase contract).

7. Intangible assets
Tax depreciation is available for purchases of software, and also for patents.
Type of asset

Rates/lives

Trademarks

N/A

Patents, copyright, design, know–how or similar
item

N/A, but by exception, patents may be amortized over a period of at least five years (since
they will fall into the public domain).

Goodwill

N/A

License or permit

N/AWorldwide Capital and Fixed Assets Guide 201853

Germany
EY contact
Martin Brandscheid+49 6196 996 27342
martin.brandscheid@de.ey.com

At a glance
Terminology used by country todescribe the recovery of capital andfixed assets
Depreciation deduction for wear(“Absetzung für Abnutzung” or“Abschreibung”)
Does the tax treatment follow book/statutory accounting depreciation?
Yes
Range of rates used
2%–100%Depreciation method used to calculate
tax deduction
Straight-line (prime cost)

54

Worldwide Capital and Fixed Assets Guide 2018

1. Entitlement to claim
The legal owner (any natural or legal person) may generally claim depreciation.
When beneficial owners take ownership rights, benefits, obligations and risks of an asset from the legal owner (e.g., by renting or
leasing), they are entitled to claim depreciation. Ownership conditions are not given equal weight and do not have to be completed
at the same time. When all conditions are not completed by the balance sheet date, beneficial ownership is determined based onforeseeable risks and changes of the asset.
The German tax authorities have set out general guidelines on identifying who (legal or beneficial owner) is entitled to capitalize
and depreciate the respective asset.

2. Allocation of tangible assets to tax depreciation lives andrates
Tax depreciation is based on accounting depreciation. Special tax rules are then applied and given priority. Assets are assessedon a “unit of use” basis. In other words, individual parts that are connected have to be allocated to that unit. When determining
the depreciation amount for a building, the calculation is based on the total amount of acquisition costs or production costs of
the whole building. The valuation of depreciation on individual parts, such as heating systems, windows or walls, is normally not
permitted. However, using different useful lives for different parts is permitted in special cases — for example, where solar panels
have been placed on the top of buildings or if a specific part of a building was built separately.
Guidelines are provided by the tax authorities.

2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Plant, machinery andequipment*

See comments

Straight-line

See comments

Depends on the industry
in which the asset isused, such as use in shift
work. Machine types
within any particularindustry denote its
useful life. For example,
packaging machines —13 years, whereas
office equipment (e.g.,
computers) — 3 years.

Motor cars*

6 years

Straight-line

16.7%

N/A

Buildings as businessassets not used forresidential purposes andbuilt after 31 March 1985

33 years

Straight-line

3%

Regarding the useful life,
several exemptions exist.
This is not the complete
list but serves as anindication of possible
cases.

In all other cases, finishedafter 31 December 1924

50 years

Straight-line

2%

In all other cases, finishedprior to 1 January 1925

40 years

Straight-line

2.5%

Buildings (general)*

Useful life effective before
33, 40, 50 years
Fittings or fixtures*

Straight-line
8 years

Straight-line

Varies in accordance tothe respective useful lift
12.5%

N/A

Worldwide Capital and Fixed Assets Guide 201855

Germany

Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Computer hardware*

3 years

Straight-line

33%

N/A

Computer software*

3 years

Straight-line

33%

Only in the case ofstandard software.
Depreciation periods
for anything other thanstandard software haveto be determined ona case-by-case basis(e.g., the useful life forbusiness management
software is typically
5 years).

Aircraft*

21 years

Straight-line

4.7%

N/A

Transport other than cars/
trucks*Cars/trucks*

Straight-line

6/9 years

Straight-line

Depends on specificvehicle (e.g., campers —eight years).
16.7%/11.1%

N/A

Office equipment,
including office furnitureand fixtures*

Straight-line

Depends on the type ofequipment (e.g., officefurniture — 13 years).

Land improvements

N/A

Qualified leaseholder
improvement property/
tenant fixtures

Straight-line

May be qualified as
singe-standing assets
or parts of buildings.
Hence, rules regarding
buildings may apply,
if asset is qualified aspart of a building for tax
purposes.

Agricultural machineryand equipment*

Straight-line

Depends on the typeof machine/equipment(e.g., tractor — 12 years).

Property used in R&D*

Straight-line

Depends on the type of
property or contractual
period (e.g., laboratory
equipment — 13 years).

* Extraordinary depreciation is applicable besides the abovementioned depreciation method.

2.2 Assets that do not qualify for tax depreciation
Any type of asset capitalized on the balance sheet may be subject to tax depreciation (depreciation rules in generally accepted
accounting principles (GAAP) may differ from tax depreciation rules), whether it is classified as tangible or intangible. Local
GAAP and tax GAAP generally distinguish between “depreciable” and “not-depreciable” assets. Depreciable assets qualify for
regular depreciation, which reflects the impairment of assets (e.g., due to use). Not-depreciable assets do not qualify for regulardepreciation, but extraordinary depreciations due to impairments are possible. Both depreciable and not-depreciable assets can be
depreciated in case of an extraordinary impairment (e.g., land does not qualify for a straight-line impairment but will be written off
in case of impairment).

2.3 Noteworthy items
The treatment of the following expenditures depends on the individual case — the following comments cannot be seen as
individually applicable.

56

Worldwide Capital and Fixed Assets Guide 2018

Germany

Preliminary costs — architect fees, legal fees, planning
As far as they are related to the acquisition or manufacturing of assets, the expenditures must be capitalized and amortized at thesame rate as the assets to which they relate.

Land remediation — removing asbestos
As far as they are related to the acquisition of properties, the expenditures must be capitalized together with the land, which
will typically be treated as not-depreciable. Not-depreciable assets will not be depreciated regularly. If the land is impaired, theexpenditures would also be impaired pro rata.

Own labor capitalized — work on developing software, for example, or carrying out work on property
As far as they are related to the acquisition of software or similar, the expenditures must be capitalized. If the software or similar is
not acquired, a capitalization of assets in general is prohibited.
If a building is purchased, the expenditures for repairs and modernization incurred within three years after acquisition have to becapitalized when the total amount of the expenditures (without value-added tax) exceeds 15% of the purchase price of the building.

2.4 Availability of immediate deductions for repairs and low value assets
Description

Detail

Low-value assets

Low-value assets with acquisition or production costs up to EUR800 (total net amount) can be written off entirely inthe year of acquisition.
Tangible assets between EUR250 and EUR1,000 (net amount) can be stated as a collective item to be depreciated on
an annual basis over a period of five years.
For example, for office chairs, a useful life of 13 years has to be considered. If the taxpayer purchases office chairsfor EUR500 (net amount), he or she can accelerate the depreciation by depreciating totally within five years by
opting for the pooling method.

Repairs/maintenancecosts

A repair is the re-enabling of the asset’s functions or the maintaining of the asset’s condition. For tax purposes, theexpenditures for repairs and maintenance can generally be fully deducted, as long as the repair/maintenance does
not lead to a significant improvement of the item to be repaired.

3. Depreciation and calculation methods

1

1

Methods used

Declining-balance method, straight-line/prime cost, performance-related disposals (incase of economic reasons).

Frequency

Generally, depreciation is calculated on a monthly basis for simplification purposes.

Year of acquisition

Depreciation is generally calculated on an exact monthly basis (pro rata temporis).
For example, if an asset is acquired in mid-November, the depreciation will be 2/12of the year amount (year amount is derived from the acquisition costs divided
through the years of standard useful life). In asset pooling (acquisition costs EUR250–
EUR1,000 (net amount); the depreciation is calculated on a yearly basis. In the yearof acquisition, the respective assets are written down with one-fifth of the acquisition
costs.

Year of disposal

In the year of disposal of capitalized assets, the asset will derecognised out with thetax book value without any further adjustment. In case of disposal of pooling assets,
the company continues to write off until the end of the five-year period.

The declining method has no relevance at the moment. This method was applicable for selective fiscal years (e.g., for movable assets between 2009 and 2010).

Worldwide Capital and Fixed Assets Guide 201857

Germany

Ability to use different methods for different assets

No. Generally, each asset requires an individual assessment. When valuing similar
current assets, the depreciation method has to be applied to all like-minded assets
within one class. Furthermore, if the asset pooling is chosen for low-value assets, thismethod has to be applied across the board to all these assets, purchased within thisfiscal year.

Ability to switch methods

No. With regard to the change of valuation methods, the principle of consistency has
to be ensured. A deviation is only permitted for a serious reason.

4. Preferential and enhanced depreciation availability
Under certain conditions, small companies (companies with business assets of less than EUR235,000 in the year of the deduction)
can claim “investment deductions” of up to 40% of the estimated future investment provided they are made within a three-year
period. Such deductions have to be reversed upon investment. These types of businesses are also allowed to write off up to
20% in total of the effective investment costs in the year of the investment up to the following four years. The aforementioned“investment deductions” are only applicable for movable tangible assets.

5. Accounting for disposals
In the case of disposal, capitalized assets will derecognised. Only pooling assets will be depreciated until they are written off (within
the five-year period).

6. Making a claim
Depreciation must be reported in the tax balance sheet.
In general, and not just for claims, German bookkeeping documentation requirements apply. For example, in cases of extraordinary
depreciation, additional documents or a valuation report may be required.

7. Intangible assets
Acquired intangible assets are generally depreciated. The depreciation period depends on the (standard) useful life, contract
periods, etc. Goodwill which has been acquired, is depreciated within a period of 15 years for tax purposes. Intangible assets thathave not been acquired cannot be capitalized in the tax balance sheet and, therefore, are not subject to depreciation.

58

Type of asset

Rates/lives

Trademarks

Depends on useful life

Patents, copyright, design, know-how or similar item

Depends on terms of use, terms of contract, etc.

Goodwill

15 years

License or permit

Depends on terms of use, terms of contract, etc.

Worldwide Capital and Fixed Assets Guide 2018

Greece

GreeceEY contacts
Stefanos Mitsios+30 210 2886 368
stefanos.mitsios@gr.ey.com

Konstantina Galli+30 210 2886 355
konstantina.galli@gr.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation or depreciation for tax
purposes
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
4%–100%Depreciation method used to calculate tax
deduction
Straight-line method

Worldwide Capital and Fixed Assets Guide 201859

Greece

1. Entitlement to claim
As a rule, the taxpayer (generally an individual or legal person) may claim depreciation on assets that are owned. In the case of afinance lease, the lessee may claim tax depreciation on leased fixed assets.
Annual depreciation is obligatory, and it begins in the month following the month when the asset is put into use.

2. Allocation of tangible assets to tax depreciation lives andrates
Depreciation of fixed assets should be applied item by item. Therefore, companies have to distinguish between assets, such asparts of a building, and apply different rates to each part (e.g., furniture, computers). Depreciation is claimed by applying a specificdepreciation rate on the acquisition or construction cost per asset class of a business.
The Greek authorities have released a detailed list, which includes the depreciation rate of each asset type (see below).

2.1 Assets that may qualify for tax depreciation
The tax depreciation rates per asset type are depicted in the below table.
Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Buildings, construction,industrial and special
installations, warehouses,etc.

25 years

Straight-line method

4%

Quarries and special
mining land pieces, except
for those used for ancillarymining activities

20 years

Straight-line method

5%

Means of public
transportation, including
airplanes, trains, ships andvessels

20 years

Straight-line method

5%

Machinery and equipment,
except for computers andsoftware10 years

Straight-line method

10%

Means of transportation
for people

6, 25 years

Straight-line method

16%

Means of transportation
for goods (internal goods
transportation)

8, 33 years

Straight-line method

12%

PC equipment, principal
and ancillary, and software

5 years

Straight-line method

20%

Equipment used forresearch anddevelopment (R&D)

2, 5 years

Straight-line method

40%

Other fixed assets*

10 years

Straight-line method

10%

Comments* Any asset that could not be included in the above table is subject to a 10% depreciation rate as “other fixed assets.”

60

Worldwide Capital and Fixed Assets Guide 2018

Greece

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land, artwork,
antiques, jewelry andother

The related assets are not subject to any wear or obsolescence over the years. In other words, these respective
assets are not devalued over time.

Fixed assets underconstruction

Expenditures aggregated in fixed assets under construction accounts should be transferred to relevant fixed asset
accounts once the construction is complete and the asset becomes ready for use.

Inactive assets/idle

The assets that are not used under the company’s regular activity are characterized as inactive/idle assets for tax
purposes. Therefore, said assets are not subject to any depreciation.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Any costs incurred by a company that are directly linked to the acquisition of an asset and are necessary for the asset to become
usable should be included in the asset’s value. Additionally, any development cost that is directly linked with a specific asset should
be included in that asset’s cost and, therefore, should be depreciated as per the tax rate provided for the asset.

2.4 Availability of immediate deductions for bonus depreciation property and for eligible tangible
property repairs
Description

Detail

Low-value assets

Tangible assets worth EUR1–EUR1,500 can be depreciated one-off at the year of acquisition.

Repair/maintenancecosts

The expenditure for repairs and maintenance can generally be fully deducted, as long as the repair/maintenance does
not constitute the acquisition cost or lead to improvement of the item.

3. Depreciation and calculation methods
Methods used

Straight-line

Frequency

Annually

Year of acquisition

Straight-line depreciation is calculated proportionately in the year of acquisition,
following the month when the asset is put into use.

Year of disposal

Depreciation is prorated in the year of disposal from the beginning of the financial
period to the month of disposal. The calculation is based on the number of months.

Ability to use different methods for different assets

No

Ability to switch methods

No

4. Preferential and enhanced depreciation availability
New companies may postpone their assets’ tax depreciation for the first three tax years of their operations. It should be noted thatthe related benefit is not mandatory but optional.

Worldwide Capital and Fixed Assets Guide 2018

61

Greece5. Accounting for disposals
If a business asset (tangible or intangible) is disposed, the difference between the disposal value and the tax book value isconsidered a taxable gain. If the proceeds are lower than the book value, the taxpayer will be taking a tax-deductible loss.

6. Making a claim
Depreciation should be reported in the tax balance sheet as well as in the tax fixed-asset register.

7. Intangible assets
Intangible assets are generally depreciated at the rate of 10%. In cases in which a different economic life is provided by theagreement concluded for the specific asset, the depreciation rate would be adjusted based on the lifetime of the intangible (onceper lifetime of the asset as provided by the agreement).

62

Type of asset

Rates/lives

Intangibles

10% (10 years)

Worldwide Capital and Fixed Assets Guide 2018

IndiaIndia

EY contacts
Sunil Kapadia+91 22 619 20820
sunil.kapadia@in.ey.com

Rahul Patni+91 226 192 1544
rahul.patni@in.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
10%–40%Depreciation method used to calculate tax
deduction
Declining-balance, straight-line

Worldwide Capital and Fixed Assets Guide 201863

India1. Entitlement to claim
Generally, legal owners are entitled to claim depreciation subject to certain conditions, such as:• The asset must be used for the purpose of business.
• The asset must be put to use during the year.
However, in the case of a finance lease transaction, the lessor would be eligible to claim depreciation as long as the transaction is
not re-characterized as a loan, and the lessor is accepted to be the person responsible for the risks and rewards of ownership.

2. Allocation of tangible assets to tax depreciation lives andrates
Accounting depreciation is not relevant for making a claim for tax depreciation.
Assets are classified as either tangible or intangible assets.
The classification is further divided into different categories. Accordingly, rates applicable to the relevant category shall be applied
to claim depreciation.

2.1 Assets that qualify for tax depreciation – tangible asset
Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Plant, machinery andequipment—

Declining-balance

15%

List of rates ofdepreciation is
mentioned in Income Tax
Rules, 1962, available atincometaxindia.gov.in

Motor cars—

Declining-balance

15%—

Declining-balance

10%

List of rates ofdepreciation is
mentioned in Income Tax
Rules, 1962, available atincometaxindia.gov.in

Buildings – Other thanused for residential
purposeUsed for residential
purpose64

5%

Furniture, fittings or
fixtures—

Declining-balance

10%—

Computer hardware—

Declining-balance

40%—

Computer software—

Declining-balance40%—

Aircraft—

Declining-balance

40%—

Transport other thanmotor cars—

Declining-balance

Various rates

List of rates ofdepreciation is
mentioned in Income Tax
Rules, 1962, available atincometaxindia.gov.in

Car parks—

Declining-balance

10%

Rate applicable forbuildings

Worldwide Capital and Fixed Assets Guide 2018

IndiaAsset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Office equipment(including office furnitureand fixtures)—

Declining-balance

10%

List of rates ofdepreciation is
mentioned in Income Tax
Rules, 1962, available atincometaxindia.gov.inLand improvements

—

—

—

Not eligible fordepreciation unless theclassification falls under
any category mentioned
in the Income Tax Rules,
1962, available atincometaxindia.gov.in

Qualified leaseholder
improvement property

—

—

—

Not eligible fordepreciation unless theclassification falls under
any category mentioned
in the Income Tax Rules,
1962, available atincometaxindia.gov.in

Agricultural machineryand equipment—

Declining-balance

Various rates

List of rates ofdepreciation is
mentioned in Income Tax
Rules, 1962, available atincometaxindia.gov.in

Property used in R&D

—

—

—

Separate deduction
is given on all capital
expenditure (exceptland) in the form ofexpenditure in the year
in which it is incurred(subject to fulfillmentof certain conditions/approvals – refer toparagraph 4). However,if capital expenditure
is not claimed,
depreciation undernormal provisions isavailable.

Ships

—

Declining-balance

20%

List of rates ofdepreciation is
mentioned in Income
Tax Rules, 1962, atincometaxindia.gov.in

Assets of the same class and rate of depreciation are pooled together in a “block.” As a result, the individual identity of the asset islost once it becomes part of the block.
If the asset is put to use for more than 180 days, depreciation at the prescribed rate can be claimed. However, if the asset is put touse for less than 180 days, the depreciation would be restricted to 50% of the prescribed rate.

Worldwide Capital and Fixed Assets Guide 201865

India2.2 Assets that qualify for tax depreciation – intangible asset
Depreciation is allowed on know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial
rights of similar nature. The depreciation rate on written-down value basis is 25%.
With respect to intangible assets, such as goodwill or customer databases, there is uncertainty about whether the same would
fall under “any other business or commercial rights of similar nature” and could, therefore, be considered as an intangible asset
for the purpose of income tax. Hence, a detailed evaluation is required based on the facts of each case to determine whether an
intangible asset exists.

2.3 Assets that do not qualify for tax depreciation
These include any asset that does not fall under the categories mentioned in points 2.1 and 2.2 above (e.g., land).
Types of assets

Explanation

Land

Land does not qualify, as it does not fall under any tangible asset subcategory.

2.4 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
It may be possible to add the expenditure to the cost of the asset. Depreciation is allowed at the rates applicable to the asset(except land) based on the category in which the asset is classified.
Furthermore, certain expenses, such as expenditure incurred on the preparation of a feasibility report or project report, incurredat the time of incorporation or extension of the undertaking, are allowed to be amortized over a period of five years, subject tocertain conditions.

2.5 Availability of immediate deductions for repairs
Typically, expenses that do not alter the useful life of an asset or expenses that are incurred to maintain the working condition of
the asset are considered as repairs and are deductible as revenue expenditure.
The treatment from a tax perspective could differ from the accounting treatment.

3. Depreciation and calculation methods

66

Methods used

Declining-balance (straight-line is available for undertakings engaged in the generation
and/or distribution of power)

Frequency

Annually

Year of disposal

Assets sold during the year are not eligible for depreciation

Ability to use different methods for different assets

Not applicable

Ability to switch methods

Not applicable

Whether depreciation is optional/mandatory

Mandatory

Worldwide Capital and Fixed Assets Guide 2018

India4. Preferential and enhanced depreciation availability
Particulars

Comment on specific application and benefits available

Investment allowance for setting up
manufacturing unit in backward area

A deduction of 15% of the actual cost of such new asset will be allowed in the year inwhich the asset is installed where an assessee sets up an undertaking for manufacture or
production of any article or thing on or after 1 April 2015 in any backward area notified by
the government of India in the states of Andhra Pradesh, Bihar, Telangana and West Bengal
and acquires and installs new machinery or plant (other than ships and aircraft) for the said
undertaking during the period 1 April 2015 to 31 March 2020.

Additional depreciation for setting up
manufacturing unit in backward area

Where an assessee sets up an undertaking for manufacture or production of any article orthing on or after 1 April 2015 in any backward area notified by the government of India in thestates of Andhra Pradesh, Bihar, Telangana and West Bengal and acquires and installs newmachinery or plant (other than ships and aircraft) for the said undertaking during the period
1 April 2015 to 31 March 2020, there is additional depreciation at the rate of 35% on thecost of the asset (available only in the first year). If the asset is put to use for less than 180
days, additional depreciation will be available at 17.5% in the first year, and balance 17.5%
will be allowed in the next year.

Scientific expenditure on in-house approved
research and development facility

A company engaged in the business of biotechnology or in any business of manufacture or
production of any article or thing, not being an article or thing specified in the list of theEleventh Schedule of the Income Tax Act, 1961, is eligible for deduction of specified revenue
and capital expenditure on scientific research (except land) of 150%** until 31 March 2020
and 100% from 1 April 2020 onward.

Additional depreciation on asset used in thebusiness of manufacture or production of any
article or thing or in the business of generation,transmission or distribution of power

Additional depreciation at the rate of 20% on the cost of the asset in the first year. If the asset
is put to use for less than 180 days, additional depreciation will be available at 10% in the firstyear and balance 10% will be allowed in the next year.

** Deduction on buildings is restricted to 100% of expenditure incurred.

5. Accounting for disposals
The sale value reduces the value of the “block of assets.” If the asset block ceases to exist or the sale value exceeds the block
value, a capital gain or loss is computed. There is no impact on previously claimed depreciation.
In undertakings in which depreciation is allowed on actual cost, a deduction is allowed in respect of the amount by which the saleprice falls short of the written-down value of the asset. The difference should be actually written off in the books of accounts.
Where the sale price is higher than the written-down value of the asset disposed of, the difference is chargeable as businessincome.

6. Making a claim
Generally, no separate books of accounts are maintained for the purpose of income tax. Separate calculations are prepared to
calculate tax depreciation; however, companies and assessees having turnover of more than the specified amount are required tohave a tax audit. In the tax audit report, the tax auditor has to certify the depreciation computed by the assessee for the purposeof income tax. Based on the tax audit report, a claim needs to be made in the return of income. The return of income provides for
specific schedules where the depreciation details are to be filled in.
Documents justifying the ownership, the use in the business or profession, cost of acquisition and the date put to use must be
maintained.

Worldwide Capital and Fixed Assets Guide 201867

ItalyEY contacts
Domenico Borzumato+39 02 851 43503
domenico.borzumato@it.ey.com

Francesco Leone+39 02 85143573
francesco.leone@it.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
Yes
Range of rates used
5.5%–35.0%
Depreciation method used to calculate tax
deduction
Straight-line (prime cost)

68

Worldwide Capital and Fixed Assets Guide 2018

1. Entitlement to claim
In general, the person entitled to claim accounting and tax depreciation is the legal owner of the asset. This rule also applies forfinancial lease agreements and rentals. Tax rules follow the abovementioned accounting approach.

2. Allocation of tangible assets to tax depreciation lives andrates
For assets that consist of several items, the taxpayer will have to determine the cost of each component. Assets with different
useful estimated lives have to be recorded and tracked individually.
For buildings, certain items (e.g., heating, telecommunications and alarm systems) can be closed as separate assets anddepreciated accordingly.
Italian generally accepted accounting principles (GAAP) do not provide a comprehensive table of assets and the lives/rates to be
applied. Indeed, from a tax perspective, tangible assets must be depreciated using specific rates provided by ministerial decree
issued on 31 December 1988. In the case of intangible assets, the tax law in force provides a specific useful life in order tocalculate the maximum depreciation quota of each fiscal year (see Article 103, Italian Tax Code).

2.1 Assets that qualify for tax depreciation
Italian GAAP does not set out a comprehensive table of assets and rates to be applied. Special rates are set out by ministerial
decree, however, and this ministerial decree is generally followed for accounting purposes. The ministerial decree determines thedepreciation quota that applies across 22 groups of industries.
The ministerial decree issued on 31 December 1988 defines rates to be applied for determining the yearly tax depreciation quota
of tangible assets and is divided into 22 groups of industries, following divided subcategories. For instance, the Group 4, Subpart
4, related to the oil and gas industry (exploration and production sector), provides the following rates:
Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Buildings

18.18

Straight-line method

5.5%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Lightweight construction

10

Straight-line method

10%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Generic plants

12.50

Straight-line method

8%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Wells

6.67

Straight-line method

15%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Specific plants

4

Straight-line method25%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Worldwide Capital and Fixed Assets Guide 201869

ItalyAsset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Sensors and recorders forgeophysical surveys

4

Straight-line method25%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Equipment and small tools

2.86

Straight-line method

35%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Plants for the processing
and purification ofwater, harmful fumes,
etc., through the use ofchemical reagents

6.67

Straight-line method

15%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Furniture and officemachinery

8.33

Straight-line method

12%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Electrical and electronic
office equipment,
including computers andtelephone systems

5

Straight-line method20%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Transport vehicles (e.g.,general heavy vehicles,
forklifts, vehicles forinternal transport)

5

Straight-line method20%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

Cars, vehicles and similar

4

Straight-line method25%

The applicable rate
may vary based on theindustry in which thecompany performs its
activity.

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

In general, costs would be added to the value of land. The specific case should be reviewed.

Tax depreciation cannot exceed the accounting depreciation. Any excess of tax depreciation can be recovered only at the end of
the accounting depreciation life.
A tax incentive introduced by Law No. 208 of December 2015 (the Italian Budget Law for 2016) states that the depreciablebase of certain plants, machinery and equipment (excluding those with depreciation rates lower than 6.5%) purchased between
15 October 2015 and 31 December 2016 is equal to 140% of the acquisition cost (so called “super-depreciation”). This provision
has been extended by Law No. 232 of 11 December 2016 (the Italian Budget Law for 2017), entered into force on 1 January
2017, to qualifying tangible assets, except certain vehicles not exclusively used for the business of the company, purchased or
acquired through a financial lease between 1 January 2017 and 30 June 2018. Law No. 205 of 27 December 2017 (the Italian
Budget Law for 2018), entered into force on 1 January 2018, has extended the above mentioned provision with reference toassets purchased between 1 January 2018 and 30 June 2019. The depreciable base for assets purchased between 1 January
2018 and 30 June 2019 is decreased to 130% of the acquisition cost, instead of 140%.

70

Worldwide Capital and Fixed Assets Guide 2018

ItalyWith specific reference to purchases in the period from 1 January 2019 to 30 June 2019, the super-depreciation can berecognized to the extent that (i) the relevant purchase order must be accepted by the seller and (ii) at least 20% of the purchaseprice must be paid by 31 December 2018.
In addition, the Italian Budget Law for 2017 introduced a tax incentive (so-called “hyper-depreciation”) with reference to thepurchase of tangible assets linked to digital and technological transformation processes promoted by the Italian Government
within its Industry Plan 4.0. In particular, the depreciable base cost of certain tangible assets purchased between 1 January
2017 and 30 June 2018 is equal to 250% of the relevant acquisition cost (qualifying assets are specifically listed in annex A to
the Italian Budget Law for 2017). For taxpayers benefiting from this latter incentive, the depreciable base of certain intangible
assets, specifically listed in annex B, is also equal to 140% of the relevant acquisition cost. The Italian Budget Law has extended
this provision for 2018. In particular, the depreciable base cost of certain tangible assets purchased between 1 January 2018and 31 December 2019 is equal to 250% of the relevant acquisition cost. For taxpayers benefiting from this latter incentive, thedepreciable base of certain intangible assets is also equal to 140% of the relevant acquisition cost.
With specific reference to purchases from 1 January 2019 to 31 December 2019, the hyper-depreciation can be recognized tothe extent that (i) the relevant purchase order must be accepted by the seller and (ii) at least 20% of the purchase price must be
paid by 31 December 2018.

2.2 Assets that do not qualify for tax depreciation
Type of assets

Explanation

Land

Under Italian tax rules, land cannot be depreciated either for accounting or for tax purposes. Land, indeed, is deemed
to have an undefined useful life.
If the historical cost (i.e., the purchase cost) of the building includes the value of the land, accounting and tax
depreciation must be adjusted in order to identify the depreciation quota virtually attributable to land. The
mentioned adjustment is equal to a lump–sum reduction of 20% or 30% of the accounting depreciation.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
They represent costs that can be directly computed, increasing the historical cost of the related asset, and consequently
depreciated for the useful life period of the principal item. Ancillary costs can be defined as the whole of costs sustained by thepurchaser in order to make the asset available and ready for use.
For tax purposes, ancillary costs follow the same approach described for accounting purposes. Indeed, they increase the historicalcost of the related asset and consequently are subject to the depreciation process. Such costs can be deducted under the ordinary
rules related to the depreciation process (using depreciation rates provided by the tax law).

Land remediation
Such costs are generally accounted for in profit and loss (P&L) as provisions for future risks and charges. The annual accrual of thementioned provisions cannot be deducted for corporate income tax purposes; thus, the deductibility is postponed to the fiscal year
in which the costs are actually sustained.

Own labor capitalized — work on developing software, for example, or carrying out work on property
Own labor can be capitalized if it refers to internal realization of assets (e.g., in the case of patents, buildings, machines). In thiscase, it can be depreciated for the useful-life period of the principal item (both from an accounting and tax standpoint). Such costs
can be deducted under the ordinary rules related to the depreciation process (using depreciation rates provided by the tax law).

Worldwide Capital and Fixed Assets Guide 201871

Italy2.4 Availability of immediate deductions for repairs
Accounting rules state that an item meeting the requirements provided for in the law for being capitalized (long–lasting use,
constituting a relevant part of the business organization of the enterprise) can be depreciated in a period equal to its useful life. As
a consequence, full depreciation of the asset in the year of acquisition is allowed, providing that its useful life is equal to one year.
Italian tax law provides that in the case of assets whose unit cost is not higher than EUR516.46, the full depreciation of theacquisition cost in the year of purchase shall be allowed in the fiscal year during which such costs have been incurred. The
mentioned rule is not mandatory.
Under Italian legislation, repair expenses can be classified into two categories: routine maintenance and improvements.
Routine maintenance cannot be accounted for as an increase in the historical cost of the item, but it is recognized in the P&L of thefinancial year in which it is sustained.
Improvements represent costs that trigger a significant and tangible increase in productivity or useful life of the asset. Such costs
must be accounted for as an increase of the historical cost and, therefore, they must be capitalized.
From a tax perspective, routine maintenance recognized in the P&L of the financial year in which it is sustained can be deducted
for corporate income tax purposes only up to 5% of the value of fixed tangible assets, according to the record of depreciable assets
at the beginning of the financial year. Any excess can be deducted in equal quotas in the following five fiscal years.
Maintenance expenses in connection with a contract with third parties providing periodic maintenance of the company’s assets are
fully deductible, and the value of the asset is not taken into account in determining the above limit.
Improvements accounted for as an increase of the historical cost and, therefore, capitalized can be deducted for corporate income
tax purposes applying the general tax rules provided above.

3. Depreciation and calculation methods
Methods used

Straight-line/prime cost

Frequency

The depreciation is calculated on an annual basis.

Year of acquisition

Accounting depreciation starts when the asset is available and ready for use. The
yearly quota is computed using a pro rata time. The term “ready for use” means thatthe asset is properly working and it is, from a juridical point of view, at the disposal of
the purchaser.
For tax purposes, instead, the depreciation starts from the fiscal year during which theasset enters into operation. The tax rate for the first year of depreciation is reduced
by 50%.

72

Year of disposal

In the year of disposal, accounting and tax depreciation is calculated following theordinary rules described above.

Ability to use different methods for different assets

From an accounting perspective, the same method and depreciation rates must be
used for the same class of assets.

Ability to switch methods

Italian GAAP n. 29 allows, respecting certain conditions, a change in accounting
criteria. From a tax perspective, the only available depreciation method is the straight–
line approach.

Worldwide Capital and Fixed Assets Guide 2018

Italy4. Preferential and enhanced depreciation availability
Enhanced/accelerated depreciation methods are allowed from an accounting standpoint, while they are not allowed for tax
purposes.
For investments in new business assets made between 25 June 2014 and 30 June 2015, companies may benefit from a tax
credit equal to 15% of the incurred expenses exceeding an adjusted average of investments in the same kind of assets sustained
during the previous five fiscal years (i.e., 2009–13). The tax credit applies only for investment in qualified assets and equipment
specifically identified by the law. Companies incorporated less than five years may benefit from such tax credit by comparison withany qualifying investment carried out as of the year of incorporation.
Qualified assets mainly include plants and equipment included in a specific measure issued by the Director of the Revenue Agency
in November 2007.
The tax credit is to be used in three equal installments to offset payments of taxes, liabilities and social securities. The tax credit isavailable starting from 1 January of the second fiscal year subsequent to the year of the investment. Please note: the mentioned
tax credit is no longer available (since it was related to investments that occurred between 25 June 2014 and 30 June 2015).
However, the same can be revoked if the qualifying assets are disposed of to third parties within the second fiscal year subsequent
to that of the investment or transferred outside of Italy within the fourth fiscal year following the one in which the tax returndeclaring the tax credit was filed.

5. Accounting for disposals
In case of disposal, the company will recognize a capital gain or loss in the P&L of the financial year in which the operation takes
place, comparing the historical cost of the asset (including the depreciation quota computed until the date in which the asset isremoved from the production process) and the consideration received.
From a bookkeeping perspective, the asset is written off from the accounting ledgers. In principle, no adjustments should be madeto the capital asset and previously claimed depreciations.
From a tax perspective, capital gains are taxed and capital losses can be deducted in the year in which the disposal takes place.
In case of the scrap of an asset, the company will recognize a capital loss equal to the residual historical cost of the asset (including
the depreciation quota computed until the date in which the asset is removed from the production process) in the P&L of thefinancial year in which the operation takes place.
From a bookkeeping perspective, the asset is written off from the accounting ledgers. In principle, no adjustments should be madeto the capital asset and previously claimed depreciations.
In case of the scrap of the assets previously booked, the company must be able to be compliant with specific provisions (e.g.,communications to be filed to the relevant tax authorities) concerning the documental proof in order to overcome the legal“presumption of sale” for corporate income tax and value-added tax purposes.

6. Making a claim
No specific claim is required for implementing the depreciation process. Compulsory rules are provided by the law with reference
to bookkeeping procedures.
Among the required documentation, accounting ledgers related to the depreciation are the asset book and the book of inventories.
However, all the relevant accounting documents (e.g., purchase invoices, agreements) related to the enterprise must be stored forat least 10 years, or for a longer period of time, depending on the statute of limitation provided by tax law.

Worldwide Capital and Fixed Assets Guide 201873

Italy7. Intangible assets
Tax depreciation is available for intangible assets.
From an accounting perspective, the depreciation starts when the asset is ready for use or when it starts to produce its benefits
for the entity. Under Italian law, the depreciation period for goodwill is related to its useful life or for a maximum 10-year period.
Goodwill can be capitalized only if a price was paid for it and with the formal authorization of the internal auditors committee. The
depreciation of goodwill must be properly documented in the explanatory notes of the financial statements.
From a tax perspective, tax law expressly identifies a defined useful life for each category of intangible asset, determining theminimum statutory length of the tax depreciation process.

74

Type of asset

Rates/lives

Trademarks

Costs for purchased trademarks can be deducted in at least 18 years in equal
installments. Longer length of the amortization process is allowed.

Patents, copyright, design, know–how or similar item

Costs for patents, copyright, design and know–how can be deducted in at least two
years in equal installments. A longer length of the amortization process is allowed.

Goodwill

Goodwill may be capitalized and depreciated for tax purposes only if a price was paid
for it (e.g., goodwill arising from mergers cannot be deducted). Costs for goodwill
can be deducted in at least 18 years in equal installments. A longer length of theamortization process is allowed.

License or permit

Licenses and permits can be deducted for a period equal to their contractual duration.

Worldwide Capital and Fixed Assets Guide 2018

JapanJapan

EY contacts
Koichi Sekiya+81 90 6030 8393
koichi.sekiya@jp.ey.com

Hideaki Furukawa+81 80 9804 3012
hideaki.furukawa@jp.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Depreciation
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
1.7%–100.0%
Depreciation method used to calculate tax
deduction
Declining-balance, straight-line/prime cost,
units of production, straight-line for overlease periods

Worldwide Capital and Fixed Assets Guide 201875

Japan1. Entitlement to claim
Economic owners, including finance leasing holders under certain conditions, are entitled to claim depreciation when theycapitalize the asset in the books of account.

2. Allocation of tangible assets to tax depreciation lives andrates
Companies are required to break assets down by the following categories for Japanese tax purposes: buildings, building
improvements, other structures, machinery, equipment, vessels, aircraft and vehicles.

2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Buildings and building
improvements

3 to 50 years

Straight-line

2%–33.4%

Car parks

10 to 50 years

Declining-balance

4%–20%

Straight-line

2%–10%

Other structures (e.g.,dam, tunnel, bridge,
railway)

3 to 80 years

Straight-line

1.3%–33.4%

Plant, machinery andequipment

2 to 24 years

Declining-balance

8.3%–100%

Straight-line

4.2%–50%

Property used in R&D

4 to 7 years

Declining-balance

28.6%–50%

Straight-line

14.3%–25%

Declining-balance

28.6%

Straight-line

14.3%

Declining-balance

10%–100%

Straight-line

5%–50%

Declining-balance

9.5%–100%

Straight-line

4.8%–50%
40% or 50%

Agricultural machineryand equipment

7 years

Furniture, fittings or
fixtures2 to 20 years

Office equipment(including office furnitureand fixtures)

2 to 21 years

Computer hardware

4 or 5 years

Declining-balance
Straight-line

20% or 25%

Computer software

3 or 5 years

Straight-line

20% or 33.4%

Motor cars

3 to 6 years

Declining-balance

33.3%–66.7%

Straight-line

16.7%–33.4%

Declining-balance

20%, 25% or 40%

Straight-line

10%, 12.5% or 20%

Declining-balance

15.4%–50%

Straight-line

7.7%–25%

Declining-balance

10%–100%

Straight-line

5%–50%

Aircraft
VesselOther transportation (e.g.,train)

76

5, 8 or 10 years
4 to 13 years
2 to 20 years

Worldwide Capital and Fixed Assets Guide 2018

Comments

For items regarded
as buildings, only thestraight-line method may
be used.

For items regarded
as buildings, only thestraight-line method may
be used.

JapanAsset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Art object

8 or 15 years

Declining-balance

13.3% or 25%

Straight-line

6.7% or 12.5%

If the acquisition costis JPY1m or more, theart object cannot berecognized as a tax
depreciation expense.

Finance lease asset

Lease periods

Straight-line method over thelease periods

Depends on lease
periods

Land improvements

N/A

N/A

N/A

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Land does not qualify, because the value of land (theoretically) does not decrease over time.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Add the expenditure to the acquisition costs of the fixed asset.

Own labor capitalized — work on developing software, for example, or carrying out work on property
Add the expenditure to the acquisition cost of the fixed asset.

2.4 Availability of immediate deductions for repairs
Description

DetailAssets below a certain
value

Assets with a value of less than JPY100,000 need to be included in the expenses.

Repairs

Repairs are ordinarily included in the current expenses.

Repair expenses are ordinarily included in the current expenses. However, repairs that extend the useful life or enhance the valueof the property are included in the acquisition cost. The following expenses are treated as repair expenses:• E xpenses for the restoration of an asset damaged by a disaster• A small amount of expenses (under JPY200,000 per year) for short-term (within three years) periodic maintenance• Expenses amounting to less than JPY600,000 or 10% of the acquisition cost of the asset, unless such expenses are clearlyrecognized as capital expenditure

Worldwide Capital and Fixed Assets Guide 201877

Japan3. Depreciation and calculation methods
Methods used

Declining-balance, straight-line/prime cost, units of production, replacement

Frequency

Annually
Depreciation is calculated on annual basis due in conjunction with the annual tax
return.

Year of acquisition

Depreciation is calculated from the (full) month in which the asset has been used forthe business for the first time (i.e., acquisition alone is not sufficient) and then if heldat year-end.

Year of disposal

In case of disposal depreciation, in principle, it is only possible if the asset is held anddisposed of at year-end.

Ability to use different methods for different assets

Different methods can be applied to the same assets by each business place if thebusiness place meets certain requirements (e.g., the company has two factories indifferent places). In that case, the company can select different methods, factory byfactory, for the same category of assets.

Ability to switch methods

Yes, an application must be filed with the National Tax Agency (NTA) with jurisdiction
over the individual or corporation to change the depreciation method before thebeginning of the tax year for which the change is to be effective.
Once changed, individuals and corporations cannot change the depreciation method
again for three years unless there are extraordinary circumstances, such as acorporate merger.

4. Preferential and enhanced depreciation availability
There are some important special depreciation regimes to note.
Asset used inComment on specific application and benefits available

Machinery, etc., for enhancement of high energysaving

30% special depreciation

Facilities, etc., for renewable energies, excluding
certain non-fossil energies (i.e. solar power, wind
power and atomic power)

30% special depreciation

Machinery, etc., is acquired by medium–sizedenterprises, etc.

30% special depreciation

Machinery, etc., is acquired in a National Strategic
Economic Growth Area

45% special depreciation (buildings and other structures — 23%)

Management improvement equipment is acquired by
specified small and medium–sized corporations, etc.

30% special depreciation

Equipment for enhancement of business productivity
for small and medium-sized corporations

Immediate depreciation

Building, etc., specifically in the local operation
reinforcement plan under the Local Revitalization Act

25% or 15% special depreciation

Software and machines, devices or equipment
acquired with the software, of which the total cost of
acquisition is JPY50 million or more. This does notinclude assets for use in R&D.

30% special depreciation

In many cases, tax credits are provided as tax incentives in certain time periods instead of special depreciation.

78

Worldwide Capital and Fixed Assets Guide 2018

Japan5. Accounting for disposals
No adjustments are made when a company disposes of an asset.

6. Making a claim
A claim is made in the tax return.
Corporations should attach Schedule 16 (the form of computing depreciation) to the tax return.

7. Intangible assets
The following intangible assets are also amortized:• Goodwill• Patents• Trademark• Utility model rights (industrial property rights)• Design model rights• Rights regarding mining, fishing, water use, use of railway property, use of electrical or gas supply facilities, and use of heat
supply, water supply or telegraph or telephone facilities, etc.
Type of asset

Rates/lives

Goodwill

20%/5 years

Patents

12.5%/8 years

Trademark10%/10 years

Utility model rights

20%/5 years

Design rights

14.3%/7 years

Worldwide Capital and Fixed Assets Guide 2018

79

Kuwait
EY contact
Tuhin Chaturvedi+965 2295 5365
tuhin.chaturvedi@kw.ey.com

At a glance
Terminology used by country todescribe the recovery of capital andfixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
4.0%–33.3%
Depreciation method used to calculate
tax deduction
Straight-line

80

Worldwide Capital and Fixed Assets Guide 2018

1. Entitlement to claim
Only legal owners are entitled to claim depreciation.

2. Allocation of tangible assets to tax depreciation
lives and rates
Tax legislation sets out the rates that apply. Different classes of assets can be treated separately. For example, elevators in abuilding can be treated as plant and machinery.

2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Plant, machinery andequipment

Straight-line method

20%–25%

Depreciation rate for drilling equipment
is 25%.

Motor cars

Straight-line method

20%

Buildings

Straight-line method

4%

Furniture, fittings or
fixtures

Straight-line method

15%

Computer hardware

Straight-line method

33.3%
25%

Computer software

Straight-line method

Aircraft

Straight-line method

Transport other thanmotor cars

Straight-line method

The law does not specify a depreciation
rate. The tax authorities may apply therate applicable for plant, machinery andequipment.
15%–20%Car parks
Office equipment(including officefurniture and fixtures)

Prefabricated building at 15%

Trucks and lorries are at 15%, and cars
and buses are at 20%.
The law does not specify a depreciation
rate.

Straight-line method

15%

Land improvements

The law does not specify a depreciation
rate.

Qualified leaseholder
improvement property

The law does not specify a depreciation
rate.

Agricultural machineryand equipment

The law does not specify a depreciation
rate.

Property used in R&D

The law does not specify a depreciationrate.

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Excluded from Kuwait tax law

Worldwide Capital and Fixed Assets Guide 201881

Kuwait

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Costs and expenses prior to signing a contract are not considered expenses since they are attributable to the head office.
Consequently, there is no relief for these costs.
Costs and expenses prior to operations and after signing a contract are treated as incorporation expenses and are allowed as
deductions in the year they are realized.
Land remediation — removing asbestos, Japanese knotweed
No specific provisions apply.
Own labor capitalized – work on developing software, for example, or carrying out work on property
No specific provisions apply.

2.4 Availability of immediate deductions for repairs
There are no specific provisions in the Kuwait tax law to determine what a repair is. If an expense is capitalized as per accounting
standards, it can be treated as such and the taxpayer may consider the expenses in line with the accounting treatment.

3. Depreciation and calculation methods
Methods used

Straight-line

Frequency

Daily

Year of acquisition

The depreciation charge is calculated based on the carrying cost of the asset from the date ofacquisition.

Year of disposal

Depreciation can be calculated until the disposal date.

Ability to use different methods fordifferent assets

No

Ability to switch methods

N/A

4. Preferential and enhanced depreciation availability
There are no specific provisions to grant enhanced deductions for assets.

5. Accounting for disposals
Any capital gain will be charged to tax, while capital loss is allowed as a deduction. However, sufficient supporting documents for
disposals are to be provided to substantiate the profit/loss. In case insufficient supporting documents are submitted to the tax
authorities, a capital gain shall be estimated, regardless of the type of disposal.
Specific cases should be consulted with the tax authorities.

6. Intangible assets
There are no specific provisions for tax relief for intangible assets. As a result, expenditure on intangibles does not attract any tax
relief.

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Worldwide Capital and Fixed Assets Guide 2018

Malaysia

Malaysia

EY contact
Robert Yoon

+60 19 337 0991
robert.yoon@my.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Capital allowances
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
3%—100%Depreciation method used to calculate tax
deduction
Straight-line

Worldwide Capital and Fixed Assets Guide 201883

Malaysia

1. Entitlement to claim
A taxpayer is entitled to claim capital allowance if:• Capital expenditure is incurred in the basis period• The taxpayer is the owner of the asset at the end of the basis period• The asset is used for the businessFor assets acquired by hire–purchase, the amount paid as the down payment and the capital portion of each instalment payment
would qualify for capital allowance claims as and when the relevant amounts are incurred.

2. Allocation of tangible assets to tax depreciation lives andrates
The taxpayer has to identify what costs are incurred on different assets.
Generally, rates of capital allowances are as follows.

A. Capital allowances rates for plantStandard rates
Types of assets

Initial allowance (IA)Annual allowance (AA)Heavy machinery and motor vehicles

20%

20%

Computer and information andcommunication technology (ICT)2equipment

20%

10%

Plant and machinery (general)

20%

14%

Others

20%

10%

0%

100%

1

3

Small-value assets

1 Qualifying expenditure on private motor vehicles is restricted to MYR50,000. However, if the vehicle is new and the total cost does not exceed
MYR150,000, the qualifying expenditure will be restricted to MYR100,000.
2 An accelerated rate of 20% initial allowance and 80% annual allowance is available up to the year of assessment 2016 for computer hardware
and software subject to meeting certain conditions. It was proposed in the Budget 2018 that a rate of 20% initial allowance and 20% annual
allowance be given in respect of ICT equipment and computer software packages effective from the year of assessment 2017. Also, thedevelopment of customized software consisting of consultation fee, licensing fee and incidental fee related to software development is proposed
to be given a rate of 20% initial allowance and 20% annual allowance, effective from the year of assessment 2018. However, this is still pending
the issuance of a gazette order (published tax legislation that is subject to approval by the Parliament of Malaysia).
3 Small-value assets refer to assets in which the value of each does not exceed MYR1,300 and the total value of such assets for each year ofassessment does not exceed MYR13,000. However, such limit is not applicable to a company that is resident and incorporated in Malaysia withpaid-up ordinary share capital of MYR2.5 million or less at the beginning of the basis period of the year of assessment and is not otherwise
related directly or indirectly to another company that has a paid-up capital of more than MYR2.5 million (a small and medium enterprise, or
SME).

B. Industrial building allowance (IBA)
A building is an industrial building if it is used for business purposes and it is used as:• A factory• A dock, wharf, jetty or other similar building• A warehouse and the business consists or mainly consists of the hire of storage space to the public

84

Worldwide Capital and Fixed Assets Guide 2018

Malaysia• A building used for the business of a water or electricity undertaking, which supplies water or electricity for consumption by the
public• A building used for the business of a telecommunication undertaking, which provides telecommunication services to the public• A building used in connection with the working of a farm
• A building used in connection with the working of a mine
A taxpayer is entitled to claim the following IBA for the year of assessment in which the taxpayer incurs the capital expenditure for
an industrial building:Types of assets

Initial allowance

Annual allowance

Industrial buildings

10%

3%

Other types of buildings do not fall within the above but can also be deemed industrial buildings. In certain cases, conditions must
be met for such structures to be considered industrial buildings and all provisions that apply to industrial buildings generally also
apply to them. The IBA rates for these special buildings may differ from the above. The rates are summarized below:

Types of assets

Initial allowance

Annual allowance

Buildings used for welfare/living
accommodation of employees of a farm

10%

3%

40%

3%

Buildings (constructed or purchased) used
for living accommodation of employees for
manufacturing, hotel or tourism business*

0%

10%

Buildings used for a childcare center
provided by employer*

0%

10%

Buildings used as a childcare center orkindergarten registered with the relevant
authority

0%10%

Approved buildings for a school or an
educational institution*

0%

10%

Buildings for industrial, technical or
vocational training*

0%

10%

Approved licensed private hospitals,
maternity homes and nursing homes*

10%

3%

Buildings used for approved research*

10%

3%

Buildings used for storage of goods forimport and export*

0%

10%

Buildings used for an approved service
project*

10%3%Constructed buildings used as living
accommodation of employees (employee
does not include a director, an individual
having control of that business or anindividual who is a member of the
management, administrative or clericalstaff)

Worldwide Capital and Fixed Assets Guide 201885

Malaysia

Types of assets

Initial allowance

Annual allowance

Public roads and ancillary structures
recoverable through toll collection,buildings constructed on a build-leasetransfer basis, buildings constructed underapproved privatization projects

10%

6%

Buildings used for registered hotels*

10%

3%

Airports (buildings, runway or ancillary
structures)*

10%

3%

Approved motor racing circuits*

10%

3%

Approved buildings used as senior centers

0%

10%

Approved buildings used for BioNexus
status companies

0%

10%

Approved buildings in Cyberjaya Flagship
Zone

0%

10%

Commercial buildings (constructed orpurchased) used for specific businesses
by Tun Razak Exchange marquee statuscompany

0%10%* With effect from the year of assessment 2016, taxpayers who own such a building and operate the relevant business in that building are entitled
to claim industrial building allowances. If part of the building is used for the purpose of letting property and it is not more than one-tenth of thefloor area of the whole building, the whole building qualifies as an industrial building. However, if it is more than one-tenth of the floor area of
the whole building, that part of the building which is let out will not be treated as an industrial building for the purpose of claiming the industrial
building allowance.

C. Agriculture allowances
When a taxpayer has incurred capital expenditure on a qualifying agriculture expenditure, the taxpayer is entitled to an agriculture
allowance as follows:
Types of qualifying agriculture expenditure

Rates

Clearing and preparation of land

50%

Planting (but not replanting) of crops on land cleared for planting

50%

Construction of a road or bridge on a farm

50%

Building used as living accommodation or welfare for employee of a
farm

20%

Any other building on a farm

10%

D. Forest allowances
When a person who has a concession or license to extract timber has incurred capital expenditure on the construction of certain
roads or buildings in a forest, such person is entitled to a forest allowance as follows:

86

Types of qualifying forest expenditure

Rates

Road or building

10%

Building used as living accommodation or for the welfare of
employee

20%

Worldwide Capital and Fixed Assets Guide 2018

Malaysia

2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Heavy machinery

4 years

Straight-line

IA=20%; AA=20%

Plant and machinery

6 years

Straight-line

IA=20%; AA=14%

Motor vehicle (licensed forcommercial transportationof goods or passengers)

4 years

Straight-line

IA=20%; AA=20%

Must be licensed byappropriate authority

Motor vehicle

4 years

Straight-line

IA=20%; AA=20%

Qualifying expenditure on
private motor vehicle isrestricted to MYR50,000.
However, if the vehicle is newand the total cost does notexceed MYR150,000, thequalifying expenditure will be
restricted to MYR100,000.

Buildings (industrial
buildings)

30 years

Straight-line

IA=10%; AA=3%

See Part 2, B for further
details.

Furniture, fittings or
fixtures

8 years

Straight-line

IA=20%; AA=10%

Computer hardware

8 years

Straight-line

IA=20%; AA=10%

Computer software

8 years

Straight-line

IA=20%; AA=10%

Aircraft

4 years

Straight-line

IA=20%; AA=20%

Transport other thanmotor vehicle

4 years

Straight-line

IA=20%; AA=20%

Car parks

6 years

Straight-line

IA=20%; AA=14%

Office equipment(including office furnitureand fixtures)

8 years

Straight-line

IA=20%; AA=10%

Agricultural machineryand equipment

2 years

Straight-line

IA=20%; AA=40%

This rate applies if certain
conditions have been met.

Building used for research

30 years

Straight-line

IA=10%; AA=3%

Research must be approved by
the Minister.

See Part 2, A for further
details.

Generally, car parks are noteligible for capital allowances.
However, in a Malaysian tax
case, the Court of Appeal heldthat car park buildings may
qualify as plant under certain
circumstances.

2.2 Assets that do not qualify for tax depreciation
Generally, building structures will not qualify for capital allowance claims unless these are industrial buildings. Industrial buildings
are specifically defined in Income Tax Act 1967 (the Act). See Section 2B for further details.

Worldwide Capital and Fixed Assets Guide 201887

Malaysia

2.3 Noteworthy items
Land remediation, dismantling, restoration
With effect from year of assessment 2009, the cost of dismantling and removing plant and machinery and restoring the site on
which the plant and machinery is located is to be included as part of residual expenditure in computing the balancing adjustments(i.e., balancing allowance and balancing charge). To qualify for this, the requirement to dismantle and restore the site must be
pursuant to any written law/agreement and the asset that has been dismantled must not be used for any business of the person orother person.

Own labor capitalized
Own labor may be claimed as a revenue expenditure if such labor cost capitalized is in relation to the salary of the company’s
employee. Claiming a capital allowance if the labor cost is in connection to the provision and installation of qualifying plant andmachinery is possible, if certain conditions are met.

2.4 Availability of immediate deductions for repairs
Description

DetailAssets with a life of less than two years

To claim as revenue expenditure on a replacement basis

Assets not exceeding MYR1,300 each and notexceeding a total value of MYR13,000

To claim AA=100%. However, such a limit is not applicable to SMEs (see Section 2A).

The expenses incurred for repair of premises, plant and machinery, or fixtures employed in the production of gross income are taxdeductible. Generally, repairs are activities undertaken merely to maintain assets in good and efficient operating condition. Thus,
the objective of a repair is to preserve the asset rather than to alter or improve it.
Tax deductions for repairs are given on an incurred basis and are not limited by reference to turnover or depreciation in thefinancial statements.

3. Capital allowance calculation methods

88

Methods used

Straight-line/prime cost

Frequency

Annually

Year of acquisition

Capital allowance is calculated starting from the year of acquisition. As long as theexpenditure is incurred and the asset is put into use (and other conditions, if relevant,are met) at any time during the basis period for a year of assessment, a full capitalallowance claim is available for that year — no apportionment is necessary. If an asset
is acquired before the commencement of business, it is deemed to be acquired (andcapital allowances will start to be claimed) on the date that business commences.

Year of disposal

Balancing allowance or balancing change adjustment is made in the year of disposal.

Ability to use different methods for different assets

No

Ability to switch methods

Not applicable

Worldwide Capital and Fixed Assets Guide 2018

Malaysia

4. Availability of accelerated capital allowance (ACA)
To encourage modernization, selected business and purchasers of selected equipment and certain categories of plant andmachinery may qualify for higher rates of capital allowances (i.e., ACA). In Malaysia, there are various types of ACAs that are
granted under separate tax gazette orders. Conditions stipulated in the respective order must be met by the taxpayer in order for
the ACA to be claimed on the capital expenditure.
Types of assets

Initial allowance

Annual allowance

Machinery and equipment
determined by the Minister used inagriculture sector

20%

40%

Prescribed equipment and facility
for collecting wastes

40%

20%

Imported prescribed heavymachinery used in construction,
plantation and timber industries

10%

10%

Building and construction

30%

20%/14%*

Timber and tin mining

60%

20%/14%*

Unless election made in writing

20%

20%/14%*

Molds for industrialized building
system40%

20%

Natural gas for bus transport andbuses using natural gas

40%

20%

Qualifying plant expenditure used
to control the quality of electric
power

20%

40%

Plant and machinery used forrecycling wastes

40%

20%

Plant and machinery used for
qualifying project in respect of apromoted activity

40%

20%

Security control equipment — up to
year of assessment 2015

20%

80%

Renovation cost incurred onbuilding located in Tun Razak
Exchange20%

40%

Qualifying plant expenditure
incurred for carrying out petroleum
operation

25%

15%

Machinery and plant (other thanimported heavy machinery) used in:* Depending on whether the machinery or plant is heavy machinery (20%) or not (14%).

Worldwide Capital and Fixed Assets Guide 201889

Malaysia

5. Accounting for disposals
When a company disposes of an asset, the disposal price or the market value of the asset (whichever is higher) will be used to
calculate a balancing allowance (BA) or balancing charge (BC). BA arises when the tax written-down value exceeds the disposal
price/market value (as the case may be). The BA is an additional allowance that is available to the taxpayer. BC arises when thedisposal price exceeds the tax written-down value — a BC will increase taxable income.
If a disposal takes place within two years of the date of acquisition of the assets, a balancing charge equal to any allowance claimed
must be made.
Different rules apply for transfers between parties that have control over one another or that are both controlled by another party.
If a company scraps an asset for no value (and assuming there is, in fact, no market value for the asset), BA can be claimed if there
is still a tax written-down value for the asset. However, if the asset has been scrapped within two years of the date of acquisition of
the asset, a balancing charge equal to any allowance claimed may apply.

6. Making a claim
Capital allowance claims should be submitted in the income tax return form. All the supporting documents are to be kept by theclaimant for tax audit purposes.
Documentation required will be a fixed asset register, sales and purchase agreements of the assets, statements of account,
invoices, receipts for services rendered for installation, stamp duty, expenditure in improving the asset, and evidence that theasset is in use for the business.

7. Intangible assets
Generally, intangible assets do not qualify for capital allowance except for computer software (subject to certain conditions being
met).

90

Worldwide Capital and Fixed Assets Guide 2018

MexicoMexicoEY contacts
Rodrigo Ochoa+52 555 283 1493
rodrigo.ochoa@mx.ey.com

Rodrigo Castellanos+52 555 283 1463
rodrigo.castellanos@mx.ey.com

Fernando Escamilla+52 555 283 1418
fernando.escamilla@mx.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
3%–100%Depreciation method used to calculate tax
deduction
Straight-line (prime cost)

Worldwide Capital and Fixed Assets Guide 201891

Mexico1. Entitlement to claim
All taxpayers who legally own a fixed asset or incur the investment, such as preoperative expenses, are entitled to claim
depreciation.

2. Allocation of tangible assets to tax depreciation
lives and rates
Varied lives/rates can be applied to different assets depending on the limits and percentages mentioned in tax law. Although it is
not required to do so, it is possible to separate parts of a building.

2.1 Assets that qualify for tax depreciation
Tax legislation provides a complete list of rates that may be applied to assets.
Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Machinery and equipment(M&E) for energy generationfrom renewable sources

1 yearStraight-line

3%–100%M&E

2–33 years

Straight-line

25%

Please note the tax legislation
also establishes otherpercentages to depreciate
other machinery andequipment according to theindustry in which the asset is
used.

35%

16%

Other M&E

92

Construction industry; agriculture,
livestock, forestry and fishingactivities
Machinery and equipment useddirectly for research on new products
or developing technology in Mexico
Air transport; transmission ofcommunications services provided
by telegraphs and by radio andtelevision stations

8%

Manufacturing of motor vehicles
and parts thereof; construction ofrailways and ships; manufactureof metal products, machineryand professional and scientificinstruments; processing of food andbeverages, etc.

3%-50%

Percentage applicable to other
M&E not specified in this document(depending on each industry)
Limit of US$10,000 on traditional
motor cars and limit of US$15,000
on electric automobiles

Motor cars

4 years

Straight-line

25%

Bicycles, electric bicycles andmotorcycles

4 years

Straight-line

25%

Buildings

10–20 years

Straight-line

5% or 10%

Furniture, fittings or fixtures

10 years

Straight-line

10%

Computer hardware

3 years

Straight-line

30%

Computer software

3 years

Straight-line

30%

Aircraft

4–10 years

Straight-line

10% or 25%

Worldwide Capital and Fixed Assets Guide 2018

Comments

10% on historical buildings

MexicoAsset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Transport other than motorcars

15 years (ships)

Straight-line

6%

Car parks

20 years

Straight-line

5%

Office equipment (including
office furniture and fixtures)

10 years

Straight-line

10%

Qualified leaseholder
improvement property

20 years

Straight-line

5%Agricultural M&E

4 years

Straight-line

25% (if applicable)

M&E used in research anddevelopment (R&D)

2.8 years

Straight-line

35%

Preoperative expenses

10 years

Straight-line

10%

Technical assistance

1 or 7 years

Straight-line

100% or 15%

When the benefit is obtained in one
year, the depreciation can be taken at
the rate of 100%, as long as detailed
analysis is provided. If, however, thebenefit is taken after one year, thenthe depreciated rate shall be taken at
15% per year.

Deferred expenses

7 years

Straight-line

15%

Detailed analysis is required toqualify the asset as a deferred
expense.

20 years

Straight-line

5%

Detailed analysis is required toqualify the asset as a deferredcharge.

Intangible assets represented
by goods or rights that makeit possible to reduce operating
costs, improve quality or
acceptance of a product, or
use or enjoy a good for alimited time that is shorter thanthe duration of the activityof the legal entity; deferred
expenses are also intangible
assets that make it possible
to exploit public property orprovide a public service underconcession.
Deferred charges
Deferred charges are thosethat meet the aforementioned
requirements, except thoseregarding the exploration of
public property or theprovision of a public service
under concession. The benefitof the charges is for unlimited
time that will depend on the
duration of the legal
entity’s activity.

Comments

Car parks are consideredas buildings.

Qualified leaseholder improvement
property is considered to be partof the building and is subject to thesame depreciation rate.

M&E used for R&D purposes

Worldwide Capital and Fixed Assets Guide 201893

Mexico

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

The value of this kind of asset increases every year for inflationary restatement.

Goodwill

Goodwill is not deductible in Mexico.

Purchase price allocation (PPA)

PPA is not deductible in Mexico for tax purposes. However, when shareholders sell their shares,
the cost of the shares sold is subject to be deductible.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
If these costs are strictly necessary for the operation of entities and if certain tax formalities are met, then entities can claim thededuction of the full amount paid in the corresponding tax year. These concepts require specific analysis in order to determine
deductibility, as there could be different interpretations from case to case.

Land remediation — removing asbestos, Japanese knotweed
The deduction can be fully claimed in the year that the expense is incurred, if it is strictly necessary for the operation of thecorresponding entity and certain tax formalities are met (case-by-case analysis is required).

Own labor capitalized — work on developing software, for example, or carrying out work on property
Case-by-case analysis is required, as much of the initial investments could be treated as yearly expenses not subject tocapitalization.

2.4 Availability of immediate deductions for repairs
Mexican income tax law states that repairs of and adaptations to facilities shall be considered investments provided they entail
additions or improvements to the fixed asset. Income tax law establishes that repairs or adaptations that entail additions or
improvements to fixed assets are deemed to be those that increase the productivity or the useful life thereof, as well as those thatallow such assets to be used in a different manner.
Mexican income tax law states that expenses for conservation, maintenance and repair made to keep facilities in good operating
condition are not to be considered as investments. If such expenses are capitalized for accounting purposes, it would beconsidered a non-book tax deduction in the year (case-by-case analysis is required).

3. Depreciation and calculation methods

94

Methods used

Straight-line (prime cost)

Frequency

Annually. Depreciation should be added with inflationary adjustment.

Year of acquisition

Depreciation is calculated from the date of acquisition of the corresponding asset and for complete
months on an annual basis (tax year). The deduction can be restated by inflation from the acquisition
date to the last month of the half of the period in which the asset was used in the year (e.g., if the asset
was used the whole year, the inflationary restatement should be from the acquisition date to June of theyear in which it will be deducted).

Year of disposal

It depends on the use and full life of the asset (applicable depreciation rate) for tax purposes.

Ability to use different methods fordifferent assets

Only the straight–line method can be used.

Ability to switch methods

No; however, the taxpayer can use lower rates than the top limit rates established for each kind of asset.
Any change should be made for at least a five-year period.

Worldwide Capital and Fixed Assets Guide 2018

Mexico4. Preferential and enhanced depreciation availability
The depreciation rate for the energy generation machinery and equipment from renewable sources or co–generation systems ofefficient electricity is 100%.
The depreciation rate for adaptations and improvements to facilitate the use of installations to people with different physicalcapabilities is 100%.
The depreciation rate for R&D purposes regarding M&E is 35%.
Mexico has not introduced any bonus provisions for investments during any specific time periods.

5. Accounting for disposals
When an asset is disposed only because it is no longer required to generate income or it is obsolete, it can be deducted in one year
for the remaining tax basis.

6. Making a claim
Claims are self–assessed.
Working papers must be prepared with the tax calculation of the tax depreciation from the date of the acquisition of the assets
until the last month of the tax year in which the deduction is carried out. A statement should also be included to show thedepreciation has been shared with the tax authorities.

7. Intangible assets
Maximum rates apply according to the type of asset and specific analysis that is required to determine the type of the intangible
asset. In the case of royalties, they can be amortized at 100% in one year, if the benefit is obtained in one year. However, if thebenefit is obtained in more than one year, it should be amortized at 15% annually, and a deeper analysis is required to determine if
the idea qualifies as a royalty for tax purposes.
Type of asset

Rates/lives

Trademarks

10% (further analysis is required)

Patents, copyright, design, know–how or similar item

10% and 15% (further analysis is required)

Goodwill

Nondeductible

License or permit

5% or 10% (further analysis is required)

Other (please provide details)

N/AWorldwide Capital and Fixed Assets Guide 201895

Netherlands
EY contacts
Wiebe Brink+31 88 407 3025
wiebe.brink@nl.ey.com

Simon Eftimov+31 88 407 7602
simon.eftimov@nl.ey.com

Dick Simonis+31 88 407 3861
dick.simonis@nl.ey.com

At a glance
Terminology used by country todescribe the recovery of capital andfixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
In principle, yes; however, adjustments
need to be made with respect to thefollowing:• Goodwill• Minimum depreciation period• Buildings• Low-cost assets•	Production costs relating to immaterial
assetsDepreciation method used to calculate
tax deduction
Various depreciation methods may befollowed, if in accordance with the “soundbusiness” practice concept.

96

Worldwide Capital and Fixed Assets Guide 2018

1. Entitlement to claim
Every taxpayer with business activities and every company subject to corporate income tax is entitled to claim tax depreciation.
A taxpayer with business assets may depreciate such assets if the value of the assets diminishes over time. Business assets areassets that are:
• Part of the fixed assets of the company• Used within the conduct of business of the company

2. Allocation of tangible assets to tax depreciation
lives and rates
For tax purposes, a business asset and all of its constituent parts are deemed to be one single asset and are depreciated as such.
However, when calculating annual depreciation, in some cases, the different useful lives of separate parts may be taken into
account.

General rule — all assets
Assets that make up more than one component/item should be capitalized as one asset if these components/items together form
a separate functioning asset for the company (functional analysis). This should be assessed on the basis of the function and theplace of that asset within the business of the company.
Separate business assets of low value (i.e., below EUR450), are depreciated in the year of purchase for the full cost price amount.

Specific rules — buildings
All assets (e.g., plumbing) that are integral and inseparable parts of a building should be depreciated together with that building as
one asset (subject to the limitations applicable to buildings).

2.1 Assets that qualify for tax depreciation
Dutch tax law maximizes depreciation for business assets to at most 20% of the cost price per year (at most 10% for goodwill),taking into account residual value, meaning that the minimum period for depreciation is 5 years (10 years for goodwill). Taxpayers
may not depreciate business assets across a period of less than five years. However, if certain conditions are met — if the value ofthe asset has decreased permanently, for example — a business asset could be impaired to its lower “business value.”
Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Tangible businessassetsUseful life, with aminimum of fiveyears

Under the “sound business”
practice concept, various
depreciation methods may
be followed, provided thatthe method is in accordancewith sound business practiceand is consistently applied.

Depreciation is
maximized to 20%
of historical cost
per year.

If certain conditions are met — if the valueof the asset has decreased permanently,
for example — a business asset could be
impaired to its lower “business value.”

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Specific rules for buildings
Depreciation of a building is only allowed if the tax book value of a building is higher than a defined minimum value(bodemwaarde), whereby the tax book value may not drop below the bodemwaarde. The bodemwaarde has been determined at:• 50% of the WOZ value (i.e., market-assessed value) for buildings in use (for 30% or more) by the company or a related partyOr• 100% of the WOZ value for buildings held as an investment. This includes buildings that are rented or leased (for 70% or more)
to non-related parties
The WOZ value is determined (annually) by the administration of the municipality in which the building is located and should
approximate the estimated fair market value.
The Dutch government has announced plans to also set the bodemwaarde for buildings in own use at 100% of the WOZ value asof 1 January 2019. This is a measure to broaden the Dutch tax base (while the corporate income tax rates will be reduced), as inpractice the depreciation potential of buildings in own use will be limited if the new rules are enacted.
Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Buildings in use by thecompany

Useful life

Sound business practiceconcept

Various, but
subject to a
restriction that the
tax book value may
not drop below thebodemwaarde of
50% of the WOZ
value

Bodemwaarde likely to be set at 100% of
the WOZ value as per 1 January 2019

Buildings held as aninvestment

Useful life

Sound business practiceconcept

Various, but
subject to a
restriction that the
tax book value may
not drop below thebodemwaarde of
100% of the WOZ
value

Specific rules for selected tangible assets
Asset type

Useful life for tax

Building improvements

Not depreciable,
immediately
deductible(exceptions may
apply, see below)• Maintenance cost
• Improvement cost

N/A

98

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

N/A

N/A

Provisions for maintenance costs are, in
principle, allowed.

N/A

N/A

Qualified leaseholder
improvement

Useful life, witha minimum of
five years

Sound business practiceconcept

At most, 20% of
the cost price per
year

Agricultural machineryand equipment

Specific rules
are applicable;
however, ingeneral, useful life
for tax is at least
five years

Sound business practiceconcept

Specific rules
are applicable;
however, ingeneral, at most,
20% of the costprice per year

Worldwide Capital and Fixed Assets Guide 2018

Further analysis is required as to whether
the building improvements are subject towear and tear.

Netherlands

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Business assets not subject to wear and tear, such as land, are not depreciable. However, if land ispurchased to extract valuable minerals, etc., then depreciation is possible.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Fees/costs should be capitalized if they are directly connected to an investment in an asset — i.e., when incurred in connection withthe acquisition or improvement of an identifiable asset of the business (for example, premises or plant). The general rule is thatthe tax book value of the fixed asset equals the cost price of the asset plus the costs related to the acquisition (or manufacturing).

Lease improvement
A “lease improvement” is also considered an asset.

Own labor capitalized — work on developing software, for example, or carrying out work on property
If an asset is manufactured/created in-house, all direct expenses and costs (voortbrengingskosten) should be capitalized, including
in-house salary and wage costs. The taxpayer should also capitalize a part of the overhead costs, although no clear guidelines areprovided on how the allocation should take place.
Production costs relating to intangible fixed assets — for example, the development costs for software — may be depreciated atonce in the financial year in which these costs are incurred.

2.4 Availability of immediate deductions
Description

DetailAssets below a certain value

An asset with a value below EUR450 is fully depreciated in the year of purchase, unless the asset
is part of a “complex of assets.”

Repairs

Maintenance or repair costs are, in principle, immediately tax-deductible in the year that theyoccur.

Production costs of self-produced
intangible assets

Yes

In the case of expenses whereby both repairs and improvement expenses are incurred, taxpayers should, in principle, be able tosplit the expenses between maintenance and improvements. However, should the expenses be considered for the purposes ofa radical improvement, a split between repair and improvement should not be made and all expenses should be capitalized as
improvement costs. Whether there is a radical improvement should be considered (objectively) from the perspective of the asset,
and it should be assessed whether in essence a new asset has been created.
If there are no radical improvements, it is relevant to make a proper distinction between repair and improvement, as the tax
treatment is significantly different. Repair costs should, in principle, be deductible for tax purposes, while improvement costs
should be capitalized. The distinction is as follows:• Repair costs are costs incurred to restore an asset to its usable condition and repair deterioration, i.e., bring a business asset
back to its original state.
• Improvement costs are costs incurred to make a material change to the asset, relating to the structure, nature or volume.
Further, it should be considered an improvement if the expenditure leads to an increase in the overall performance of the asset.

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When reviewing whether the costs should be qualified as repair or improvement, taxpayers should review:• The nature of the activities• The condition of the asset at time of the creation or after any subsequent change
Furthermore, we note that repair costs related to a newly acquired business asset are not tax-deductible to the extent that the
repair costs are connected to a deterioration of the business asset in the period prior to the acquisition. Those costs are capitalized
instead.

3. Depreciation and calculation methods
Methods used

Declining-balance, straight-line/prime cost, other

Frequency

Annually

Year of acquisition

Depreciation is applied from the date the asset comes into use.
A business asset is only depreciated during the period the asset is used for business activities. Example:
a machine is ordered on 1 May, delivered on 1 July and used as per that date. Depreciation then is 6/12of the normal annual depreciation (assuming that the financial year is a calendar year).

Year of disposal

Depreciation is only available for the months during the period the asset is used for business activities.

Ability to use different methods fordifferent assets

There is a choice of method that you can apply for different business assets. For every single businessasset, taxpayers may assess what they think is the optimal method of depreciation. The taxpayers arefree in their choice, provided that the depreciation method chosen is in accordance with the soundbusiness principle. However, in some cases, similar assets are aggregated into one single asset.

Ability to switch methods

In principle, a change of depreciation scheme is permitted (e.g., commercial depreciation has changed) if
it is not aimed at realizing an incidental tax benefit.
A taxpayer must pursue consistent behavior in tax accounting. The transition from one depreciation
method to another depreciation method is a system change that goes against this consistent behavior.
Nevertheless, a transition to another depreciation method is permitted if this new method is in line withthe sound business principle and the transition is not motivated by gaining an incidental tax advantage.

4. Preferential and enhanced depreciation availability
Dutch tax law provides for various facilities:

Accelerated depreciation of several specific assets
Accelerated depreciation applies to:• Investments in assets that are in the interest of the protection of the environment in the Netherlands and that appear on the socalled VAMIL (Vervroegde Afschrijving Milieu-investeringen) list
• Seagoing vessels• Assets that are a part of the fixed assets of a startup (not available for companies subject to corporate income tax)
Accelerated depreciation of qualifying assets is available if certain conditions are met. Restrictions may apply.

Investment allowances
The investment allowances include:• Small-scale investment allowance• Energy investment allowance (EIA: energie-investeringaftrek)• Environmental investment allowance (MIA: milieu-investeringsaftrek)

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These allowances are calculated as a percentage of the amount of an investment in a business asset and may be deducted in
the year of investment. The EIA and MIA are available for investments in not previously used business assets that have been
designated as investments that are important for efficient use of energy or designated as investments that are important forprotecting the Netherlands environment.

Research and development facility
The WBSO (R&D tax credit) provides for a payroll tax benefit for R&D costs and expenditures.

5. Accounting for disposals
If a tangible or intangible business asset is disposed, the difference between the disposal value (the proceeds) and the tax bookvalue is considered a taxable gain. If the proceeds are lower than the book value, the taxpayer will be taking a tax-deductible loss.
The taxation of the gain may be deferred by creating a “reinvestment” reserve. The reinvestment reserve is not obligatory andsubject to strict rules. For example:• The reserves can only be formed if and as long as the taxpayer has the intention to reinvest the proceeds in new assets. If thedivested asset is not depreciable (e.g., land) or is usually depreciated over a period of more than 10 years (e.g., buildings), it isrequired that the new asset has the same economic function as the divested asset.
• The required reinvestment should not occur later than three years after the year in which the reserve was formed. If no
reinvestment occurred within the three-year period, the original gain will be added to the taxable profit and taxed at theordinary rate.
• The (proportional) tax book value of the new asset may not be lower than the (proportional) tax book value of the divested asset
as a result of which the reinvestment reserve was created.
In some cases, previous investment allowances are required to be undone by adding a disinvestment addition to the taxable profitof the year of disposal of the asset.
If an asset is scrapped, the tax asset value may be reduced to zero.

6. Making a claim
The claim for depreciation and devaluation is made within the corporate income tax return.
For some tax facilities, additional procedures need to be followed. An application needs to be filed with the Rijksdienst voor
Ondernemend Nederland (RVO, a special government agency) if a taxpayer would like to apply for:• Accelerated depreciation
• EIA
• MIA
• Research and development payroll tax credit (WBSO)

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7. Intangible assets
For tax purposes, a business asset (intangible or tangible) is considered to be present if this asset is considered to be part of
the fixed assets of the company, is used within the conduct of business of the company and fulfills an independent role with thecompany. Dutch tax law caps depreciation to 20% per year (10% for goodwill) taking into account residual value, meaning that theminimum period for depreciation is 5 years (10 years for goodwill).
Type of asset

Rates/lives

Trademarks

No guidelines, case-by-case analysis

Patents, copyright, design, know-how or similar item

No guidelines, case-by-case analysis

Goodwill

Depreciation of goodwill is only allowed if the goodwill has been acquired from anotherparty. Self-created goodwill cannot be capitalized and depreciated.
Goodwill included in the acquisition price of shares forms part of the fiscal cost pricevalue of the shares and cannot be depreciated for Dutch tax purposes.
Dutch tax law restricts depreciation for goodwill to 10% of the cost price per year,
meaning that the minimum period for depreciation for goodwill is at least 10 years.

License or permit

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No guidelines, case-by-case analysis

Nigeria

Nigeria

EY contact
Temitope Samagbeyi+234 815 088 5000
temitope.samagbeyi@ng.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Capital allowances
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
10%–95%
Depreciation method used to calculate tax
deduction
Declining-balance and straight-line
methods

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1. Entitlement to claim
Legal owners of assets are entitled to claim tax depreciation or capital allowances once the assets are put to use. They are
considered as an entity taxable under the tax legislation and have incurred qualifying capital expenditures under the law.
However, for a finance lease, lessees can claim capital allowances on assets reported in their books.

2. Allocation of tangible assets to tax depreciation lives andrates
The legislation below regulates tax depreciation in Nigeria:• The Companies Income Tax Act, Cap C21 LFN 2004 as amended (CITA)• The Petroleum Profit Tax Act, Cap P13 LFN 2004 as amended (PPTA)

2.1 Assets that qualify for tax depreciation
Under CITA, the following rates apply:
Asset type

Useful life for tax

Initial allowance*

Annual allowance**

Building expenditure(industrial and nonindustrial)

10 years

15%

10%

Agricultural production

4 years95%

0%

Others4 years50%

25% Public transportation

1 year95%

0%

Others4 years

50%

25%

Comments

Plant and machinery:

Motor vehicles

Housing estate

4 years

50%

25%

Ranching and plantations

2 years

30%

50%

Mining

1 year95%

0%Plantation equipment

1 year95%

0%

Furniture and fittings

5 years

25%

20%

Research anddevelopment

1 year95%0%*Initial allowance — this is a one-off allowance granted only in the first year based on applicable rates. It applies to all items of qualifying
expenditure.
**Annual allowance — this is granted yearly based on applicable rates. It is computed on the residue of qualifying expenditure, after deduction of
initial allowance, on a straight-line basis. An amount of NGN10 per item is retained in the books for tax purposes until the asset is disposed of.

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Under the PPTA, the following rates apply:
Asset type

Useful life for tax

Initial allowance*

Annual allowance**

Comments

Plant, machinery andfixtures

5 years

N/A

20%

In the last year, 19% is claimed
as annual allowance, while
1% is retained in the books
as residue until the asset isdisposed of.

Pipelines and storagetanks

5 years

N/A

20%

In the last year, 19% is claimed
as annual allowance, while
1% is retained in the books
as residue until the asset isdisposed of.

Buildings, structures orworks of a permanent
nature5 years

N/A

20%

In the last year, 19% is claimed
as annual allowance, while
1% is retained in the books
as residue until the asset isdisposed of.

Drilling expenditure

5 years

N/A

20%

In the last year, 19% is claimed
as annual allowance, while
1% is retained in the books
as residue until the asset isdisposed of.

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Land is not depreciated because land is assumed to have an unlimited useful life and does notdepreciate in value.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
All expenses (not capital in nature) that are wholly, reasonably, exclusively and necessarily (WREN) incurred for the purpose of
the business are usually allowed for tax purposes. Therefore, preliminary costs — e.g., architect fees, legal fees — are allowed forincome tax purposes so long as they meet the WREN test.

Land remediation — removing asbestos
In addition to the comment in the preceding paragraph, costs incurred for restoration or abandonment purposes are, forpetroleum profit tax purposes, treated as allowable expenses so long they are wholly, exclusively and necessarily (WEN) incurred
for the purpose of the business operations. In addition, in order for these expenses to be treated as tax-deductible, they must
represent actual cash flows (payments) and not accrual or provisions.

Own labor capitalized — work on developing software, for example, or carrying out work on property
For CITA purposes, this is classed as a qualifying capital expenditure (QCE); thus, capital allowance is granted. Please refer to ourcomments in Section 7 below.

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2.4 Availability of immediate deductions for repairs• Repairs are not defined in the tax acts; however, the case law definition may be considered.
• In line with Section 24 of CITA, repairs that are WREN incurred by a business in generating profits are granted full tax
deductions. Where, however, such repairs alter the useful life or significantly improve the output of the QCE, it will be treated ascapital cost, and for tax purposes, be taken as addition to the QCE.
• Section 10 of the PPTA allows tax deductions for repair expenses that are WEN incurred in connection with the petroleum
operation business.

3. Depreciation and calculation methods
Methods used

In line with the applicable accounting standards, depreciation methods include (butare not limited to) straight-line and declining-balance.

Frequency

Depreciation is usually calculated on an annual basis. However, the accounting
standards require certain conditions must be met should company’s management
consider a change in the depreciation policy. One such condition is that the changemust be retrospectively applied.

Year of acquisition

Capital allowance is claimable in the first year the asset is put into use.

Year of disposal

Balancing adjustment arises when an asset is disposed of. Capital allowance cannot be
claimed in the year of disposal.

Ability to use different methods for different assets

Different depreciation methods can be applied to different classes of assets. However,for tax purposes, a uniform capital allowance rate applies to assets within the sameclass.

Ability to switch methods

Yes, this is possible, as noted above.

4. Preferential and enhanced depreciation availability
An initial allowance may be claimed in the first year of an asset’s use, while the balance is amortized as annual allowance over the
tax life of the asset.
Tax legislation in Nigeria grants investment allowances on qualifying expenditures made to incentivize the growth of business andindustry sectors (e.g., oil and gas), and the rates are as specified in the tax legislations. These allowances are in no way connectedto the capital allowances granted in lieu of accounting depreciation.

Investment allowance
The tax laws grant an investment allowance of 10% only in the first year that an item of plant and machinery is put to use. This
allowance is to encourage companies that invest in plant and machinery. The allowance is in addition to 100% of the cost of thequalifying asset that is claimed through initial and annual allowances.

Petroleum Investment Allowance
The Petroleum Investment Allowance is granted to oil exploration and production (E&P) companies in the first year when they
incur QCE for the purpose of operations. The rates depend on the fiscal regime (contract form) under which the E&P company
operates. The following rates apply to companies in joint venture operations.
• Onshore operations — 5%
• Operations in areas up to 100 meters deep — 10%• Operations in areas between 101 meters and 200 meters deep — 15%• Operations in areas more than 200 meters deep — 20%

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Investment Tax Credit and Investment Tax Allowance
A company engaged in petroleum operations in the deep offshore and inland basin pursuant to a Production Sharing Contract(PSC) executed in 1993 is allowed an investment tax credit (ITC) at the rate of 50% of the qualifying expenditure in accordancewith the terms of the PSC for the accounting period in which that asset was first used for the purpose of its petroleum operations.
Similarly, a company that has executed a PSC after 1 July 1998 is entitled to an Investment Tax Allowance (ITA) at a flat rate of
50% of qualifying expenditures in the accounting year in which the relevant asset is first used in the business.

5. Accounting for disposals
The tax acts require a balancing adjustment to be calculated and incorporated in the tax computations — i.e., a balancing charge
or allowance. This adjustment arises when an asset is disposed. It represents the difference between the sales proceeds and thetax written-down value (TWDV) of the asset (cost of the asset less the total of initial and annual allowances claimed to date on theasset). If the consideration is higher than the TWDV, there is a balancing charge, which represents additional income liable to tax.
However, the amount taxable will be restricted to the actual capital allowances (initial plus annual only) claimed to date on theasset. On the other hand, if the consideration is less, there will be a balancing allowance, which qualifies as a tax deduction.
This treatment also applies when an asset is scrapped.

6. Making a claim
A claim is made when a taxable entity puts to use an asset that represents a qualifying capital expenditure in a given year. The
amount of capital allowances claimable in any year of assessment is restricted to 66.67% of assessable profits (accounting profits
after adjustment for tax items) for companies, other than those involved in agricultural and manufacturing businesses. Any capitalallowance that cannot be recovered from the assessable profit in the year of acquisition can be carried forward indefinitely.
Under the PPTA, the capital allowance relief that can be claimed is the aggregate capital allowance for the relevant tax year.
This, however, is subject to a limitation. Capital allowance relief is limited to the lower of either the aggregate capital allowance
computed for the tax year or a sum equal to 85% of the assessable profits of the accounting period, less 170% of the total amountof the deduction allowed as Petroleum Investment Allowance for that period.
Unrelieved capital allowances may be carried forward until they are relieved.
In accordance with the provisions of the Industrial Inspectorate Act (Cap 180 LFN 2004), a company is required to support fixed
assets acquired by it with a fixed assets acceptance certificate issued by the Industrial Inspectorate Division (IID) of the Federal
Ministry of Industry, Trade and Investment.
The IID issues a Certificate of Acceptance for Fixed Assets (CAFA) for qualifying assets worth NGN500,000 and above.
The Federal Inland Revenue Service (FIRS) is empowered to withdraw capital allowances claimed on such fixed assets if there areno acceptance certificates to support them. If the capital allowances already claimed are withdrawn by the FIRS, it may result in
additional tax liabilities (including penalty and interest charges) for the relevant years.
Although the relevance of this certificate has been questioned in several quarters, the FIRS may request that companies still
provide copies of the CAFA. In the absence of the CAFA, it is our view that other purchase supporting documents will suffice in theevent of a tax audit or investigation by the FIRS. If neither of these documents is available, the capital allowance already claimedon the qualifying assets may be withdrawn. Also, the Financial Reporting Council of Nigeria (FRCN) has published rules thatprohibit the recognition of transactions in the financial statements of a company if such transactions require regulatory approvals
that have not been obtained. CAFA falls into this category of transactions and hypothetically means that a company may not beable to recognize its noncurrent assets in the financial statements unless CAFA has been granted for the relevant financial periods.

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7. Intangible assets
The expenditure on an intangible asset is allowable for tax purposes. This is to the extent that it is considered to be WREN incurred
for the purpose of carrying out the business of the company. Opinions, however, differ on the appropriate treatment for tax
purposes. Thus, while the differing opinions agree that the expenditure is deductible for tax purposes, it is considered as a capital
item in an instance and a revenue item on the other hand. We have considered each of these below:

a. Revenue expenditure
If the item qualifies as revenue expenditure, the cost should be expensed based on the useful life of the asset. Thus, in thisinstance, the annual amortization by the company would be allowed for tax purposes.

b. Qualifying capital expenditure
If the item qualifies as capital expenditure, the company will be able to claim 95% of the cost of acquisition of the asset as a onceand-for-all capital allowance in the year of acquisition. The balance of 5% will, however, be retained in the books until disposal of
the asset.
For companies liable to tax under the PPTA, any expenditure (tangible and intangible) directly incurred in connection with thedrilling of an exploration well and the following two appraisal wells in the same field may be expensed. Subsequent intangible
expenditures may be capitalized and capital allowance claimed on them.
Type of asset

Rates/lives

Trademarks

Initial allowance I annual allowance 50:25 (4 years)

Patents, copyright, design, know-how or similar item

Initial allowance I annual allowance 50:25 (4 years)

Goodwill

N/A

License or permit

Initial allowance I annual allowance 50:25 (4 years)

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NorwayEY contacts
Marcel Sikkema+46 73 340 77 82
marcel.sikkema@se.ey.com

Harald Kjeldsen+47 2400 2400
harald.kjeldsen@no.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation (skattemessig avskrivning)
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
0%–30%
Depreciation method used to calculate tax
deduction
Declining-balance, straight-line, residual
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1. Entitlement to claim
The legal owners are generally entitled to claim. Certain leasing/renting arrangement could qualify; however, case-by-caseassessments are necessary.

2. Allocation of tangible assets to tax depreciation lives andrates
A deprecation obligation exists for all assets with a useful economic life of a least three years and a value of at least NOK15,000.
Generally, it is not required to break down assets, given that the asset represents one functional and physical unit.
Special rules apply to buildings. Depreciable buildings are subdivided as follows — allocation depends on a case-by-caseassessment:
Type of building

Yearly deduction percentage

Buildings and plant, hotels, lodging houses, catering premises, etc.

4%

Office buildings2%

Permanent technical installations in buildings

10%

Buildings of such simple construction that they must be assumed tohave an economic life of not more than 20 years from construction.
The same applies to installations with economic lives of not more than
20 years when new.

10%

Livestock buildings in agriculture and forestry

6%

2.1 Assets that qualify for tax depreciation
Asset typeType of tax
depreciation method

Applicable tax
depreciation rate

Plants, including
technical ancillaryand supplementary
installations inindustrial facilities

Declining-balance method

4%Machinery andequipment

Declining-balance method

20%

Buildings

Declining-balance method

2%–4% (6%, 10%)

Furniture, fittings andfixtures

Declining-balance method

20%

Computer hardware
and machines for officeuse

Declining-balance method

30%

Computer software

Declining-balancemethod/straight-line (ifstand-alone)

20%–30%/linear overlife-span

Ships, vessels, rigs

Declining-balance method

14%

Aircraft, helicopters

Declining-balance method

12%

Heavy goods vehicles,
lorries, buses, vans andtaxis

Declining-balance method

24%

Passenger cars

Declining-balance method

20%

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Comments

See above

Together with the computer/machinery or stand-alone as anintangible asset

Norway

Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Comments

Lessee’s improvementon the rented asset

Declining-balancemethod/straight-line

0%–30%

Depends on who becomes theowner of the improvement.
Follows the ordinary rules forthe improved asset

Dams, tunnels,
penstocks and power
stations that belongs
to a power generation
facility

Straight-line

1.5%

Annual depreciation over
67 years

Machinery at power
stations, generators,
pipes, insulationin shafts/tunnels,
hatches, grates, etc.

Straight-line

2.5%

Annual depreciation over
40 years

Facilities for thetransmission anddistribution ofelectricity andelectrotechnicalequipment in power
enterprises, and such
fixed assets usedin other businessactivities

Declining-balance method

5%

Investments in
fixed assets usedin extractive (i.e.,
upstream) activities
that are subject tospecial oil taxation.
Mainly investmentson the Norwegiancontinental shelf

Straight-line

16.67%

Annual depreciation over
6 years

2.2 Assets that do not qualify for tax depreciation
Types of assets

ExplanationLand

Is considered not to have a decreasing value

Artwork, etc.

Is considered not to have a decreasing value

Apartments, living quarters, houses intended
for living, etc.

Is considered not have a decreasing value, even if it is a part of a business activity (such as
renting). Workmen’s houses, “hotels,” etc., can be depreciated, however — case-by-caseassessment

Shares/equity

No loss incurred before realization (and no tax deduction for company shareholders due toexemption method)

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Could be directly deductible if connected to business activity and incurred in an early phase of an asset acquisition. If incurred in alater phase (especially if the target asset has been identified), these costs should normally be capitalized together with the asset.

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R&D costs
Costs for own research and development relating to specific projects that may become or have become fixed assets, must be
capitalized together with the relevant fixed asset.

Land remediation — removing asbestos, etc.
No special rules apply. Treatment depends on the specific conditions and situation in general.

Own labor capitalized
The fair market value of one’s own labor should normally be included as taxable income and the same value should be capitalizedon the tax cost basis of the asset(s).

2.4 Availability of immediate deductions
Description

DetailAsset with life of less than
three years

Equipment with a general economic life-span of less than three years

Asset with a value of lessthan NOK15,000

Standardized amountRepairs

Repairs to conserve the original conditions, including simulated necessary repairs in an upgrade

Assets that are acquired anddisposed of in the same year

Deductive effect will be included in the gain/loss on the asset.

3. Depreciation and calculation methods
Methods used

Declining-balance, straight-line, residual value

Frequency

Annually

Year of acquisition

Depreciation is calculated for the whole year if held at year-end (some modifications
for intangibles — time-limited rights).

Year of disposal

No depreciation is available if not held at year-end (some modifications because someassets are depreciated jointly).

Ability to use different methods for different assets

No

Ability to switch methods

No

4. Preferential and enhanced depreciation availability• Only repairs and maintenance expenses can be fully deducted immediately.
• An additional 22% uplift applies against the special oil tax for upstream activities.

5. Accounting for disposals
Several of the minor assets with high depreciation rates are depreciated jointly in groups. These groups are:
• Office equipment, etc.
• Acquired goodwill

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Norway• Heavy goods vehicles, lorries, buses, vans, taxis and vehicles for the transport of disabled persons• Passenger cars, tractors, machinery, tools, instruments, furnishings, etc.
If an asset belonging to one of these groups is disposed, the disposal compensation (if any) reduces the value of the depreciationgroup (and, therefore, future depreciations).
If the value becomes negative, there is a taxable income. Each year’s taxable income will equal the negative residual value
multiplied with the depreciation rate for the group.
For the following assets types, a separate asset balance must be recorded for each fixed asset:• Ships, vessels, rigs, etc.
• Aircraft, helicopters• Facilities for the transmission and distribution of electricity and electrotechnical equipment in power enterprises, and such fixed
assets used in other business activities• Buildings and plant, hotels, lodging houses, catering premises, etc. Plant shall include, inter alia, technical ancillary andsupplementary installations in industrial facilities, including sewage treatment plant, compressed air plant, cooling systems andsimilar.
• Office buildings
If such an asset is disposed, the compensation (if any) reduces the value of the separate asset balance. Gains and losses aretransferred to a gain and loss account.*
For the following assets, there is one joint group for permanent technical installations per building:• Permanent technical installations in buildings, including heating plant, refrigeration and freezing facilities, electricalinstallations, sanitary installations, elevator installations.

6. Making a claim
Depreciation is claimed on an annual basis to the tax authority through the income tax return.

7. Intangible assets
Acquired goodwill (i.e., the residual amount when acquiring a business) can be depreciated by 20% in accordance with the
declining-balance method. Self-developed goodwill cannot be depreciated.
Intangible assets with an unlimited economic life-span cannot be depreciated, except if there is an obvious reduction of value.
Intangible assets with a limited economic life-span can be depreciated with identical annual amounts over the life-span of theasset. Higher annual deductions are only granted if the reduction in value is obviously taking place more rapidly.
Type of asset

Rates/lives

Trademarks

Case-by-case assessment

Patents, copyright, design, know-how or similar item

Case-by-case assessment

Goodwill — acquired

20% declining-balance method

License or permit

Case-by-case assessment* If the gain and loss account is positive, no less than 20% of the balance should be recognized as income. If the balance is negative, up to 20%
shall be recognized as a deduction.
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Portugal
EY contact
Francisco Hamilton Pereira+35 121 791 2749
francisco.hamilton-pereira@pt.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
Yes
Range of rates used
1.00%–33.33%
Depreciation method used to calculate tax
deduction
Straight-line/prime cost, diminishing(declining) method

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1. Entitlement to claim
Legal owners are entitled to claim depreciation.

2. Allocation of tangible assets to tax depreciation lives andrates
In Portugal, the rate applicable to each asset is established by the Portuguese tax legislation and depends on the type of asset andsector of activity (proxy for the intensity of use).
The Portuguese tax legislation provides a comprehensive table of assets and the applicable rates. The tables can be found in
Decreto Regulamentar No. 25/2009. Please note that the table below applies to non-specific sectors of activity. There are otherdepreciation rates for specific assets of various industries.

2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Plant, machinery andequipment

Plant — 20 years

Generally, depreciation and amortization
are calculated using the straight-line
method, taking into account periods ofminimum and maximum useful life of theasset, as well as the industry in which
the asset is used and the conditions of
its use.

Plant — 5%

N/A

Motor cars

4 years

Same method as above

25%

N/A

Buildings

10 yearsSame method as above

10%

N/A

Furniture, fittings or TV
fixtures

8 years

Same method as above

12.5%

N/A

Computer hardware

3 years

Same method as above

33.33%

N/A

Computer software

3 years

Same method as above

33.33%

N/A

Aircraft

5 years

Same method as above

20%

N/A

Transport other thanmotor cars

Motorcycles – 4 years

Same method as above

Motorcycles – 25%

N/A

Car parks

20 yearsSame method as above

5%

N/A

Office equipment(including office furnitureand fixtures)

8 years

Same method as above

12.5%

N/A

Land improvements

Flooring — 20 years

Same method as above

Flooring — 5%

N/A

Machinery andequipment — 5 to 8
years

Seals — 8.33%

Seals — 12 years

Walls — 5%

Walls — 20 years
Qualified leaseholder
improvement property

N/A

Machinery andequipment — 12.5% to
20%

N/A

N/A

N/A

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Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Comments

Agricultural machineryand equipment

Between 6 and 20
years

Generally, depreciation and amortization
are calculated using the straight-line
method, taking into account periods ofminimum and maximum useful life of theasset, as well as the industry in which
the asset is used and the conditions of
its use.

Between 5% and16.66%

N/A

Property used in R&D

Depends on theamount of time of the
exclusive use of theproperty

Same method as above

N/A

N/A

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Land does not qualify, as it is not considered to be a production asset. However, when land is used for exploitation
purposes, it may be possible to qualify for tax depreciation, considering only the part subject to exploitation.

Intangible assets

Intangible assets that may be used indefinitely are not subject to depreciation.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
May be added to the costs of the asset and depreciated accordinglyLand remediation — removing asbestos, Japanese knotweed
N/A

Own labor capitalized — work on developing software, for example, or carrying out work on property
Development projects, such as intangible assets, may be subject to depreciation at a rate of 33.33%.

2.4 Availability of immediate deductions for repairs
Assets below EUR1,000 may be written off in the year of acquisition, unless the asset forms part of a bigger asset that should be
regarded as the entirety.
The Portuguese tax legislation only allows significant repairs or improvements to be depreciated if the repairs or improvements
increase the future economic benefits of the assets.

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Portugal

3. Depreciation and calculation methods
Methods used

Straight-line/prime cost, diminishing (declining) method

Frequency

Annually or monthly

Year of acquisition

As noted above, it is possible to choose a monthly basis in the year of acquisition or
disposal.

Year of disposal

Depreciation may be claimed on a monthly basis in the year of disposal.

Ability to use different methods for different assets

The Portuguese legislation allows two different methods that may be applied to all
assets (straight-line/prime cost and double-diminishing (declining) method). Thesemethods may be applied to the assets, but it is not required that the company use thesame methods for all assets.
When considering an individual asset, the depreciation method should be the samefor its entire life cycle. However, if there is a sound economic change in the asset’suse, the methodology and the rate of depreciation may be changed. In this case, thecompany must obtain the tax administration’s authorization.

Ability to switch methods

The Portuguese legislation allows the use of different methods in different years.
However, the company must justify the reason for the change and ask for permission
from the Portuguese tax authorities if the method to be used is different from the two
methods allowed by Portuguese tax legislation.

4. Preferential and enhanced depreciation availability and tax
credits
4.1 General allowances
A depreciation in Portugal depends on the number of shifts per day the company is in operation. Only the assets subject to more
intensive use are eligible for accelerated depreciation. This rule is not applicable to buildings and other assets that, because of
their nature, are always subject to intensive use.

4.2. Bonus provision and tax creditsa) Special tax regime to support investment (RFAI)
This is a tax credit that is granted to companies that invest in fixed assets. The tax credit can be obtained for years 2013 to 2020.

Form of funding
If there are insufficient profits in any year to use the credit, the credit can be carried forward for up to 10 years.

Funding quota
Twenty-five percent of the eligible capital expenditure regarding the investment amount of EUR10 million and 10% regarding theinvestment amount exceeding EUR10 million, up to a limit of 50% of the tax liability.

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Assessment basis
All fixed assets with the exception of land — except when used to operate mining concessions, mineral waters and spring waters,
quarries, clay pits and sand pits in mining projects — construction, acquisition, repair and expansion of any buildings, factories
or those used for administrative activities; light passenger or mixed vehicles; furniture and accent pieces or decoration, except
hotel equipment for tourist operations; social equipment, except equipment that the company is required to have by law; othercapital goods not directly and indiscernibly associated with the company’s production; investment in intangible assets, consistingof expenditures on technology transfers, in particular through the acquisition of patent rights, licenses, know-how or technicalknowledge not protected by patent

Main funding conditions
Companies must be established in Portugal and have no debts to tax authorities or social security; taxable income cannot be
determined by indirect methods; and job creation is necessary.
Productive investment must be considered an initial investment project. To be considered an initial investment project, theinvestment project must be related to:• Creation of a new establishment• Productive capacity increase in an existing establishment• Diversification of the production of an existing establishment by producing products that were not produced in that
establishment• Fundamental change of the global production process of an existing establishment

Main funding obligations
Maintain the funded assets for a period of five years in the company; create and maintain jobs until 2020.

Application process
The incentive does not require any formal application. The estimated tax credit is directly included in the corporate income tax
return.

b) Productive investment tax benefit
This is a tax credit granted to investment projects that are relevant to the strategic development of the Portuguese economy andrelevant for reducing regional disparities, encourage the creation or maintenance of jobs, and contribute to driving Portugal’s
technological innovation and scientific research. This tax credit must be granted through a contractual agreement settled between
the company and the Portuguese Government and must be presented through an application process. Only investment projects ofmore than EUR3 million are eligible.

Form of funding
If there are insufficient profits in any year to use the credit, the credit can be carried forward for up to 10 years.

Funding quota
Base rate of 10% of the eligible capital expenditure that can be increased up to 25%, depending on the location of the investment
and the number of jobs created by the investment project, up to a limit of the maximum between 50% of the tax liability or 25% of
the tax credit.

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Portugal

Application process
The incentive is attributed through a formal application process, prior to the start of the investment project.

Assessment basis
All fixed assets, with the exception of:• Land, except when used to operate mining concessions; mineral waters and spring waters; quarries; clay pits; and sand pits inmining projects• Construction, acquisition, repair and expansion of any buildings, except factories or those used for administrative activities• Light passenger or mixed vehicles• Furniture and ancient pieces or decoration, except hotel equipment for tourist operations• Social equipment• Other capital goods not directly and indiscernibly associated with the company’s production
Or• Investment in intangible assets, consisting of expenditures on technology transfers, in particular through the acquisition ofpatent rights, licenses, know-how or technical knowledge not protected by patent

Main funding conditions
Companies must be established in Portugal, have no debts to tax authorities or social security, have taxable income that cannot be
determined by indirect methods, and create jobs.
Productive investment must be considered an initial investment project. To be considered an initial investment project, theinvestment project must be related to:• Creation of a new establishment• Productive capacity increase of an existing establishment• Diversification of the production of an existing establishment by producing products that were not produced in that
establishment• Fundamental change of the global production process of an existing establishment

Main funding obligations
Maintain the funded assets for a period of five years in the company; create and maintain jobs.

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5. Accounting for disposals
At the moment when a company disposes of an asset and performs a sale, a capital gain or loss is realized. Regarding thedepreciation that has been tax-deductible, there is no adjustment, and the depreciation is considered in the capital gain or loss
computation. However, for assets that have been depreciated using depreciation rates below the minimum (for tax purposes), thecomputation of the capital gain or loss must take into account the minimum depreciation rate.
If a company has scraps as an asset, the dismantling or destruction of the asset is accepted as an expense for tax purposes of the
net value of the assets without having to request prior acceptance from the tax authorities, if the tax dossier includes:• Dismantling, decommissioning, abandonment or destruction of goods, signed by two witnesses, proving the facts leading to theoccurrence• Itemized list of goods scrapped• Copy of the notice sent to the local tax office, with a minimum of 15 days’ notice, communicating the location, date and hour ofthe scrap

6. Making a claim
Claims are normally made in a written document (i.e., not a part of the formal tax return document) that is presented to the tax
authorities.

7. Intangible assets
Intangible assets are amortizable when subject to depreciation, especially because they have a limited time period. Tax
depreciation is available for the following intangible assets:• Expenditure on development projects• Elements of industrial property (such as patents, trademarks, licenses, processes, designs or other similar rights), acquired
against payment whose use is recognized for a limited period of time
Type of asset

Rates/lives

Trademarks

The depreciation rate is determined by the time period that the exclusive use takes
place.

Patents, copyright, design, know-how or similar item

The depreciation rate is determined by the time period that the exclusive use takes
place.

GoodwillTax depreciation is not available for goodwill.

License or permit

The depreciation rate is determined by the time period when the exclusive use takes
place.

Development projects

Subject to a depreciation rate of 33.33%.

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Russia

RussiaEY contact
Ivan Rodionov+7 495 755 9719
ivan.rodionov@ru.ey.com

At a glance
Terminology used by country todescribe the recovery of capital andfixed assets
Tangible assets — tax depreciation
Intangible assets — tax amortization
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
Declining-balance — 0.7%–14.3%
Straight-line — 0.1%–7.7%
Depreciation method used to calculate
tax deduction
Declining-balance (in Russian tax law —nonlinear method), straight-line (primecost) (in Russian tax law — linear method)

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1. Entitlement to claim
Only legal owners of the asset are entitled to claim tax depreciation. The exception to this rule is for lessees in respect of
inseparable improvements of property made by lessee with consent of lessor.

2. Allocation of tangible assets to tax depreciation lives andrates
For tax purposes, assets qualify for depreciation groups/write–off periods based on whether they are permanent or movable
assets. While permanent structures may qualify for building allowances, movable assets (e.g., heating systems, partition walls, airconditioners) may qualify for shorter write–off periods.

2.1 Assets that qualify for tax depreciation
According to the Tax Code of the Russian Federation (the Tax Code), all depreciable assets should be classified under 10
depreciation groups that have different useful life periods. A government decree establishes useful life periods for each
depreciation group and contains detailed description of assets included in each group. The useful life periods for groups are as
follows:• Group 1 — 1–2 years• Group 2 — 2–3 years• Group 3 — 3–5 years• Group 4 — 5–7 years• Group 5 — 7–10 years• Group 6 — 10–15 years• Group 7 — 15–20 years• Group 8 — 20–25 years• Group 9 — 25–30 years• Group 10 — 30 years and more
Taxpayers have the right to apply for either a linear or nonlinear method. However, a declining-balance method cannot be applied
to assets of groups 8–10, such as buildings, transmission equipment, intangible assets, nor to fixed assets used only in activities
related to the extraction of hydrocarbons at a new offshore field of hydrocarbons.

Linear is calculated as:
Monthly depreciation = initial value of asset x 1/n, where n is the useful life period of an asset in months.

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Russia

Nonlinear depreciation is calculated as:
Monthly depreciation = B x K/100, where B is the aggregated balance value of assets of one depreciation group and K is thedepreciation rate, which equals:
Depreciation group

Asset description

Monthly depreciation rate
for nonlinear method

Group 1

Machines and equipment

14.3

Group 2

Machines and equipment
Transport vehicles
Perennial plantings
Production and household equipment

8.8Group 3Structures and transfer mechanisms
Machines and equipment
Transport vehicles
Production and household equipment

5.6

Group 4

Buildings
Structures and transfer mechanisms
Machines and equipment
Production and household equipment
Draught animals
Perennial plantings
Transport vehicles

3.8Group 5

Buildings
Machines and equipment
Structures and transfer mechanisms
Transport vehicles
Production and household equipment
Fixed assets not included in other headings

2.7Group 6Structures and transfer mechanisms
Housing
Machines and equipment
Transport vehicles
Production and household equipment
Perennial plantings

1.8

Group 7

Buildings
Structures and transfer mechanisms
Machines and equipment
Transport vehicles
Perennial plantings
Fixed assets not included in other headings

1.3

Group 8

Buildings
Structures and transfer mechanisms
Machines and equipment
Transport vehicles
Production and household equipment

1.0Group 9Buildings
Structures and transfer mechanisms
Machines and equipment
Transport vehicles

0.8Group 10

Buildings
Structures and transfer mechanisms
Housing
Machines and equipment
Transport vehicles
Perennial plantings

0.7

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Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Plant, machinery andequipment

1–30 years and more:

Linear or nonlinear (ifuseful life is over 20
years, only linear ispossible)

Please see comments
aboveLinear or nonlinear

Please see comments
aboveLinear or nonlinear (ifuseful life is over 20
years, only linear method
is possible)

Please see comments
above

Useful life periods are very diverse,
ranging from 1 to over 30 years,
depending on nature, complexity anddurability of assets.
For example:
Assembly lines, hammers, engines —1–2 years
Oilfield equipment — 2–3 years
Pipelines, diesel generator — 3–5 years
Well for exploratory drilling —5–7 years
Metalworking machines — 7–10 years

Motor cars

Passenger cars — 3–5 years
Trucks — 7–10/5–7/3–5 years
Specialized vehicles — 7–10/5-7/
2-3 years

Buildings

Wooden buildings, frame constructions(except residential buildings) — 15–20
years
Building from concrete, bricks,
armored concrete (except residentialbuildings) — 20–25 years
Residential buildings — 30+ years

Furniture, fittings or
fixtures

5–7 years

Linear or nonlinear

Please see comments
above

Computer hardware

2–3 years

Linear or nonlinear

Please see comments
above

Computer software

Not less than 2 years (if classified as
intangible asset)

Linear or nonlinear

Please see comments
above

Aircraft

10–15 years

Linear or nonlinear

Please see comments
aboveTransport other thanmotor cars

7–30 years

Linear or nonlinear (ifuseful life is over 20
years, only linear method
is possible)

Please see comments
above

Office equipment

5–7 years

Linear or nonlinear

Please see comments
aboveLand improvements

7–10 years

Linear or nonlinear

Please see comments
above

Qualified leaseholder
improvement

Depends on useful life period of
property and duration of leaseagreement

Linear or nonlinear

Please see comments
above

Agricultural machineryand equipment

2–10 years

Linear or nonlinear

Please see comments
above

Property used in R&D

7–10 years

Linear or nonlinear

Please see comments
above

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Comments

Russia

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land, natural resources (water, mineral resources, etc.)

Disallowed (non–depreciable asset) — According to Article 256 of the Tax Code, thesetypes of assets do not qualify for tax depreciation.

Artworks, books, items of cultural value

Disallowed (non–depreciable asset) — According to Article 256 of the Tax Code, thesetypes of assets do not qualify for tax depreciation.

Objects of urban landscaping; land improvements
constructed with government/municipal financing

Disallowed (non–depreciable asset) — According to Article 256 of the Tax Code, thesetypes of assets do not qualify for tax depreciation.

Certain categories of property of non-commercial andbudget organizations

Disallowed (non–depreciable asset) — According to Article 256 of the Tax Code, thesetypes of assets do not qualify for tax depreciation.

Inventories, construction-in-progress, securities andderivatives (forwards, futures, options)

Disallowed (non–depreciable asset) — According to Article 256 of the Tax Code, thesetypes of assets do not qualify for tax depreciation.

Intellectual property ownership rights if the contract
concerning the acquisition of the abovementioned
rights stipulates that the payment shall be made byperiodical installments within the whole term of thecontract’s validity

Disallowed (non–depreciable asset) — According to Article 256 of the Tax Code, thesetypes of assets do not qualify for tax depreciation.

Property acquired/created at the expense of budgetaryfunds (except for property gained as a result ofprivatization)

Disallowed (non–depreciable asset) — According to Article 256 of the Tax Code, thesetypes of assets do not qualify for tax depreciation.

Assets in respect to which a taxpayer used a right forinvestment tax deduction

Disallowed (non–depreciable asset) — According to Article 256 of the Tax Code, thesetypes of assets do not qualify for tax depreciation. This provision is effective until
1 January 2018.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
One–off deduction as current period expenses.

Land remediation — removing asbestos
Special tax treatment:• Expenses on land remediation that are associated with development of natural resources are recognized evenly during the twoyear period• Expenses on land remediation not associated with resources development are subject to one–off deduction

Own labor capitalized — work on developing software, for example, or carrying out work on property• Capitalized on the value of assets

2.4 Availability of immediate deductions for repairs
Description

DetailAssets below a certain value
with minimum one-year usefullife (12 months)

Assets with value below RUR100,000 since 2016 according to the Federal Law of 08.06.2015 No. 150 FZ are
not recognized as fixed assets and are written off at the moment of purchase/putting into production.

Repairs

Please see comments on repairs below.

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Russian tax legislation differentiates between current repairs and capital repairs. Current repairs are written off in the period inwhich they are incurred, while capital repairs are capitalized in the cost of fixed assets and are written off as depreciated.
Current repairs are repairs that neither improve the technical characteristics of assets nor lead to lengthening the useful life ofassets.
Capital repairs that improve technical characteristics or lead to lengthening of useful life period should be capitalized in the valueof fixed assets.
Taxpayers are also allowed to create provision (reserve) for repair expenses.
However, if the taxpayer creates provision (reserve) for repair expenses, the amount of provision (reserve) cannot exceed theaverage amount of repair expenses during the past three years.

3. Depreciation and calculation methods
Methods used

Special coefficient up to two is applied to depreciation rate (accelerated deduction ofdepreciation).

Frequency

Depreciation is calculated and recognized on a monthly basis.

Year of acquisition

Capital allowances can only be claimed from the date the asset is brought into use,and not from the acquisition date.
Capital allowances in the form of tax depreciation are claimed starting from themonth after the asset was brought into use according to the depreciation rate anddepreciation method.
The taxpayers also have the right to apply a depreciation premium (a one–off
deduction of 30% or 10% of the fixed asset’s value); the depreciation premium isapplied voluntarily by the taxpayers. The depreciation premium can be claimed as aone–off deduction of 30% or 10% (depending on the depreciation group) of the initialvalue of the asset in the month after putting the asset into use.
The amount of capital allowances percentage is:• 30% for assets belonging to depreciation groups 3–7• 10% for assets belonging to depreciation groups 1–2 and 8–10

Year of disposal

Tax depreciation is calculated and recognized until the month when the asset isdisposed. The remaining value of the fixed asset is recognized as expense on the saleof the asset.

Ability to use different methods for different assets

The same method should be applied to all assets except when the company applies thenonlinear method, which should be applied to all assets except for assets belonging todepreciation groups 8–10. Taxpayers may also elect to change the method from thelinear or nonlinear method or vice versa. Proper records must be kept.

Ability to switch methods

Taxpayers have the right to change depreciation method. Change from the nonlinear
to linear method is allowed once within five years. The new method of depreciationmust be applied at the beginning of the new tax period (one calendar year). Taxpayers
need to establish depreciation methods in tax accounting policy for the respective tax
period.

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4. Preferential and enhanced depreciation availability
Tax depreciation method

Comment on specific application and benefits available

Assets used in research and development

Depreciation of assets used in R&D activities meeting the criteria in the Decreeof the Government:
Depreciation expenditure 100% + 50% additional (i.e., super allowance of 150%)
Examples of R&D activities qualifying for this allowance: development of
nanotechnology information telecommunication systems, biosciences, environmental
conservancy, transport and space systems, development of energy-efficient andnuclear technologies and fixed assets used only in R&D activities (special coefficient
up to three)

Energy-efficient assets (excluding buildings)

Special coefficient up to two is applied to depreciation rate (accelerated
deduction of depreciation)
Examples of assets qualifying for this allowance: oil pumps, oil filters, various oil
refinery equipment, turbines, furnaces, railway engines, heating equipment

Industry-specific• Agricultural• Oil and gas

Special coefficient up to two is applied to depreciation rate (accelerated
deduction of depreciation)
Assets owned by agricultural organizations (poultry farms, animal production units,
greenhouse complexes, fur production plants)
Special coefficient up to three is applied to depreciation rate (accelerated
deduction of depreciation)
Fixed assets used by holders of oilfield development licenses for production ofhydrocarbons from new subsea oil and gas fields

Fixed assets owned by residents of industrial
production and tourism and recreation special
economic zones

Special coefficient up to two is applied to depreciation rate (accelerated
deduction of depreciation).

Assets used in harsh environments or in intensive shifts
working arrangement

Special coefficient up to two is applied to depreciation rate (accelerated
deduction of depreciation), except for:• Fixed assets put into operation after 31 December 2013
• Fixed assets belonging to groups 1–3 of taxpayers using nonlinear method

Financial leasing agreement

Special coefficient up to three is applied to depreciation rate of leased fixed
assets, except for fixed assets belonging to groups 1–3.

Assets used in water supply and water disposal

Special coefficient up to three is applied to depreciation rate of assets specified
by the Government. This provision is effective until 1 January 2023 and applied toassets put into operation after 1 January 2018.

Investment tax deduction

One-off deduction of up to 90% of investment expenditure (expenses on certain fixed
assets stated by law and on the extension, refitting, reconstruction, modernization
and retooling of such assets) from the regional portion of profits tax and theremaining 10% from the federal portion.
There is an upper limit on the regional part of investment tax deduction equal tothe difference between tax payable to the regional budget when calculated at thestandard rate and tax payable to the regional budget when calculated based on a rateof 5%. However, the federal portion of profits tax may be reduced to zero.
The usage of the deduction is restricted for certain groups of taxpayers (e.g., totaxpayers that already enjoy particular tax preferences).

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5. Accounting for disposals
The company recognizes income from disposal of an asset (income from sale) and cost of an asset (its balance value). The
company does not make any changes to previously claimed depreciation.
If the company recognizes a loss on the sale of an asset, such loss should be recognized evenly during the remaining period of
useful life of an asset. For example, if the loss from the sale of an asset is RUR10 million and the remaining useful life period of thisasset is five years, the loss will be recognized partially as RUR2 million during five years.
If an asset is scrapped, no changes to previously claimed depreciation are made. The remaining balance value of the asset isrecognized as other expenses for tax purposes in the period of asset disposal (liquidation).

6. Making a claim
Capital allowances are claimed as part of the profits tax return.
In Russia, there are two ways of making a claim. Generally, taxpayers should submit interim profits tax returns after the firstquarter, six and nine months of the tax year. The Tax Code also allows the taxpayer to change the general approach and submit
interim profits tax returns monthly from the beginning of a new tax year based on notification of the tax authority until the end ofa current year. The final profits tax return is submitted no later than 28 March of the year following the reporting year. Selected
approaches should be recognized in the profits tax base and profits tax return.
The company should establish the depreciation method, application of depreciation premium, special coefficients for depreciationand categories of assets in its tax accounting policy that is updated on a yearly basis.
Taxpayers are also obliged to maintain tax depreciation registers and primary documentation that should be submitted with tax
authorities during tax audits upon request.

7. Intangible assets
Intangible assets are depreciated with linear or nonlinear methods (selected by a taxpayer, except for intangible assets fromgroups 8–10, for which, according to the Tax Code, the linear method is used). The Russian tax law establishes the following
criteria for recognition of intangible assets:• Intangible assets must have capability to gain income.
• The company must have properly executed documentation for intangible assets (i.e., patent, contract or certificate).
Type of asset

Rates/lives

Trademarks

The useful life period (and corresponding depreciation rate) should be determined by
the taxpayer depending on the period of license/patent/certificate for trademark. If
determination of the useful life period is not possible, the useful life period should be
set as 10 years.

Patents, copyright, design, know–how or similar item

The useful life period (and depreciation rate) is determined by the taxpayer but cannot
be less than two years.

Goodwill

Russian legislation does not recognize goodwill as an intangible asset.

License or permit

This depends on the type of license:• Licenses on development of natural resources are written off during a two-year
period as expenses on resource development• Other licenses are depreciated similarly to patents/copyrights

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Saudi Arabia

Saudi Arabia

EY contact
Mirza Ashraf+966 11 215 9820
mirza.ashraf@sa.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
5%–25%
Depreciation method used to calculate tax
deduction
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Saudi Arabia

1. Entitlement to claim
All taxpayers are entitled to claim tax depreciation.

2. Allocation of tangible assets to tax depreciation lives andrates
Saudi tax law specifies five categories for capital assets as follows:
Serial number

Category

Depreciation rate

1

Fixed buildings

5%

2Industrial and agricultural movable buildings

10%3

Factories, plant, machinery, computer hardware andapplication programs (computer software), and equipment,
including passenger cars and cargo vehicles

25%

4

Expenses for geological surveying, drilling, exploration andother preliminary work to extract natural resources anddevelop their fields

20%

5

All other tangible and intangible assets of depreciable
nature not included in previous categories, such as
furniture, planes, ships and trains, and goodwill

10%

Where land and buildings are purchased, a reasonable amount must be apportioned between the building and the land.

2.1 Assets that qualify for tax depreciation
Asset typeType of tax depreciation
methodApplicable tax
depreciation rate

Plant, machinery andequipment

Declining-balance

25%

Passenger and cargovehiclesDeclining-balance

25%

Buildings

Declining-balance

5%

Furniture, fittings or fixtures

Declining-balance

10%

Computer hardware

Declining-balance

25%

Computer software

Declining-balance25%

Aircraft

Declining-balance

10%

Transport other than motorcars

Declining-balance25%

Car parks

For industrial and agricultural movable buildings,
the depreciation rate is 10%.

Passenger and cargo vehicles at 25%; ships andtrains at 10%.
The law does not specify the depreciation rate.
Documents need to be reviewed to determine thetax depreciation rate.

Office equipment

Declining-balance

25%

Office furniture and fixtures

Declining-balance

10%

Land improvements

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Comments

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The law does not specify the depreciation rate.
Documents need to be reviewed to determine thetax depreciation rate.

Saudi Arabia

Asset typeType of tax depreciation
methodApplicable tax
depreciation rate

Comments

Qualified leaseholder
improvement property

Declining-balance

10%

Leasehold improvements are subject todepreciation at 10%.

Agricultural machinery andequipment

Declining-balance25%

Property used in R&D

Declining-balance

Geological survey, drilling,etc.

Declining method

20%

Build, own, operate andtransfer (BOOT) contracts
assetsAmortized based on duration ofcontract

Amortized based on
duration of contract

No special treatment. The law does not specify
the depreciation rate. Documents need to bereviewed to determine the tax depreciation rate.

2.2 Assets that do not qualify for tax depreciation
The tax legislation provides a comprehensive table of assets and rates that must be applied.
Types of assets

Explanation

Land

Specifically excluded from the law

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
No specific provisions; follow the accounting treatment
Land remediation — removing asbestos, Japanese knotweed
No specific provisions; follow the accounting treatment
Own labor capitalized — work on developing software, for example, or carrying out work on property
No specific provisions; follow the accounting treatment to permit capitalization of salaries

2.4 Availability of immediate deductions for repairs
Deductions for repairs and maintenance with respect to fixed assets are limited to 4% of the relevant asset category’s closingbalance; the excess must be disallowed and capitalized in the tax pool for tax purposes.

3. Depreciation and calculation methods
Methods used

Declining-balance; contractual period for BOOT assets.

Frequency

Annually, 50% of the cost in year of acquisition, and the remaining 50% in the following year except
BOOT assets.

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Year of acquisition

In the year of acquisition, 50% of the value of an asset is added to the relevant category. The remainder
is added to the asset category in the subsequent year.

Year of disposal

Sale proceeds from disposal reduce the balance of an asset category. The proceeds are split 50/50 in theyear disposed and the subsequent year. Accounting profit or loss arising from disposal of fixed assets is
disallowed for tax purposes.

Ability to use different methods fordifferent assets

There is no choice of depreciation method. The same method should be applied for all fixed assets.

Ability to switch methods

No

4. Preferential and enhanced depreciation availability
There are no particular incentives to reward investment in capital expenditure.

5. Accounting for disposals
Tax depreciation would continue on any scrapped fixed assets written off with certain conditions. However, accounting losses
arising from the write–off of fixed assets would be disallowed for tax purposes.
No gain or loss arises upon transfer of assets between group companies provided the following two criteria are met:
• The companies are wholly owned, directly or indirectly, within the same group.
• The asset should not be disposed of to a company outside the group prior the lapse of two years from the date of transfer.

6. Making a claim
A specific exhibit must be attached to the tax return to make a claim. The taxpayer must retain acquisition invoices, disposal
invoices and other relevant documents.

7. Intangible assets
There is no guidance issued on what constitutes an intangible asset, and therefore the treatment will likely follow Saudi accounting
guidelines.
Type of asset

Rates/lives

Trademarks

10%, declining-balance

Patents, copyright, design, know–how or similar item

10%, declining-balance

Goodwill

10%, declining-balance

License or permit

10%, declining-balance

8. Depreciation for zakat purpose
The Saudi tax department has recently issued new Zakat Implementing Regulations. According to these regulations, Saudiregistered companies wholly owned by Saudi, Bahraini, Emirati, Kuwaiti, Qatari and Omani nationals are required to use thestraight-line method for calculating depreciation for zakat purposes. Under this method, the zakat payers are allowed to claim
depreciation calculated using the accounting depreciation rates.

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Singapore

Singapore

EY contacts
Angela Tan+65 6309 8804
angela.tan@sg.ey.com

Swee Thiam Teh+65 6309 8770
swee-thiam.teh@sg.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Capital allowances
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
Varying rates, up to 100%
Depreciation method used to calculate tax
deduction
Straight-line

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Singapore

1. Entitlement to claim
A person (includes a company, body of persons) carrying on a trade, profession or business who incurs capital expenditure on theprovision of machinery or plant for the purpose of that trade, profession or business is entitled to claim capital allowance on themachinery or plant.

2. Allocation of tangible assets to tax depreciation lives andrates
Capital allowances can be claimed on plant or machinery. The parts of a building that are plant or machinery are eligible for capitalallowance claims.

2.1 Assets that qualify for tax depreciation
Singapore’s tax legislation provides a prescribed list of assets where a capital allowance claim is granted on a straight-line basis andis calculated by reference to the number of years of working life.
Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Plant, machinery andequipment

Three years orapplicable number ofyears of working life,
depending on natureof asset

Straight-line

See note 1

Motor carsThree years orapplicable number ofyears of working life,
depending on natureof asset

Straight-line

Buildings

N/A

Furniture, fittings or
fixtures

Computer hardware

Computer software

Aircraft

134

Comments

See also note 1

See note 1

This generally applies tocommercial vehicles.

N/A

N/A

No claim for buildings
unless a tax incentive(land intensification
allowance) is applied forand granted.

Three years orapplicable number ofyears of working life,
depending on natureof asset

Straight-line

See note 1

One year or three
years or the applicable
number of years ofworking life

Straight-line

One year or three
years or the applicable
number of years ofworking life

Straight-line

Three years or theapplicable number ofyears of working life

Straight-line

Worldwide Capital and Fixed Assets Guide 2018

See also note 1

See also note 1

See note 1

See also note 1

See note 1

See also note 1

See also note 1

See note 1

For companies with anaircraft leasing scheme,
the useful life of theaircraft may be extended
up to 20 years.

Singapore

Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Transport other thanmotor carsThree years orapplicable number ofyears of working life,
depending on natureof asset

Straight-line

See note 1

Office equipment

Three years orapplicable number ofyears of working life,
depending on natureof asset

Straight-line

Qualified leaseholder
improvement property

The useful life will
depend on the natureof the asset. For
example, if it is officeequipment, capitalallowance will beclaimed over three
years or the applicable
number of years ofworking life.

Straight-line

Agricultural machineryand equipment

Three years orapplicable number ofyears of working life,
depending on natureof asset

Straight-line

Property used in R&D

The useful life will
depend on the natureof the asset. For
example, if it is officefurniture, capitalallowance will beclaimed over three
years or the applicable
number of years ofworking life.

Straight-line

Comments

See also note 1

See note 1

See also note 1

See note 1

See also note 1

Capital allowance on
plant or machinerywill be granted to theperson (lessor or lessee,
depending on the type oflease) who incurred thecapital expenditure.

See note 1

See also note 1

See note 1

See also note 1

Note 1: Capital allowance claim based on number of years of working life:• Initial allowance of 20% of qualifying cost incurred• Annual allowance computed (if the asset is in use at the end of the basis period) as follows:
Qualifying cost — initial allowance
Working life
Accelerated capital allowance claim (i.e., written off over one or three years)• Straight-line basis over one or three years on the qualifying cost incurred

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land, car parks, improvements

Land does not qualify.

Motor vehicle (private cars)

Capital allowance for private cars (with certain exception) is specifically prohibited under theSingapore Income Tax Act.

General electrical fittings, lightings,
sanitary fittings, etc.

They are considered as being integral to and forming part of the building or structure.*

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Singapore

Please note that the above are some examples of assets that do not qualify for capital allowance claims.
* These expenditures may qualify for a tax deduction on qualifying renovation or refurbishment expenditure, subject to certain conditions andexpenditure cap.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
The architect fees, legal fees and planning costs in respect of a building do not qualify for capital allowances.

Land remediation — removing asbestos, Japanese knotweed
Not applicable

Own labor capitalized — work on developing software, for example, or carrying out work on property
Generally, the capitalized labour cost for the development of software qualifies for capital allowance over one year (i.e., 100% over
one year).

2.4 Availability of immediate deductions for repairs
Tax deduction is claimable on any expenses incurred for repair of premises, plant, machinery or fixtures employed in acquiring theincome or for the renewal, repair or alteration of any implement, utensil or article so employed, provided that no deduction shallbe made for the cost of renewal of any plant, machinery or fixture, which is subject to capital allowance claims, or for the cost ofreconstruction or rebuilding of any premises, buildings, structures or works of a permanent nature.
In this regard, repairs and replacements with no element of improvement should qualify for tax deduction. The cost of repairs andreplacements are immediately written off when they are incurred.

3. Depreciation and calculation methods
Methods used

Straight-line

Frequency

Capital allowance is calculated on an annual basis (for the whole year) for the year ofassessment notwithstanding that the asset may be acquired for less than 12-month
period in a tax year.

Year of acquisition

Capital allowance is calculated for the whole year in the year of acquisition.

Year of disposal

A balancing allowance or charge may arise.

Ability to use different methods for different assets

Capital allowance may be claimed based on the number of years of working life or over
one or three years (accelerated capital allowance claim).

Ability to switch methods

N/A

4. Preferential and enhanced depreciation availability
Accelerated capital allowances
Accelerated capital allowance (i.e., 100% over one year) may be claimed on certain assets (see table below).

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Singapore

Enhanced capital allowances
Companies may apply for the investment allowance incentive, subject to conditions wherein allowances of up to 100% of qualifying
equipment cost may be granted on top of the normal capital allowance. This is a discretionary tax incentive and requires the
taxpayer to go through an application process.
Asset used inComment on specific application and benefits available

All industries

Computer or other prescribed automation equipment and certain equipment (generator,
robot, efficient pollution control, etc.) qualify for accelerated capital allowance (i.e., 100%over one year).

Description

DetailAsset with cost not exceeding SGD5,000
individually

Accelerated capital allowance (i.e., 100% over one year), subject to a cap of SGD30,000 for
any year of assessment.

5. Accounting for disposals
The disposal will trigger a balancing adjustment event. A balancing allowance (which is a deduction) or charge (which is a taxableitem) may arise.
In the event that an asset is scrapped, a deductible balancing allowance (equal to the tax written-down value) will arise if the capitalallowance on the asset has not been fully claimed. If the capital allowance has been fully claimed, no adjustments will be made.

6. Making a claim
The claim for capital allowance is made in the income tax return filed with the tax authorities. Supporting documents are required
to be maintained to substantiate the claims.

7. Intangible assets
Writing-down allowance is available on capital expenditure incurred by a company from 1 November 2003 to the last day ofthe basis period for year of assessment 2020 in acquiring intellectual property rights (IPRs) for use in its trade or business. The
transferee must acquire the legal and economic ownership of the IPRs from the transferor, except for cases where approval of
waiver from legal ownership has been granted. Writing-down allowance on IPRs is claimed on a straight-line basis over a five-year
period. For qualifying IPRs acquired within the basis periods for years of assessment 2017 to 2020, writing-down allowance may
be claimed over 5, 10 or 15 years.
IPRs are defined as patents, trademarks, copyrights, registered designs, geographical indications, layout design of integrated
circuits, trade secrets or information with commercial value, and plant variety.
Writing-down allowance is granted over two years on approved IPRs acquired from 22 January 2009 to the last day of the basis
period for YA 2018 on films, television programs, digital animations or games, or other media and digital entertainment contents
by an approved media and digital entertainment company for the purpose of its trade.
Type of asset

Rates/lives

Trademarks

Refer to above

Patents, copyright, design, know-how or similar item

Refer to above

Goodwill

N/A

License or permit

Fee is tax-deductible if incurred for renewal.

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South Africa
EY contact
Heleen Etzebeth+27 11 772 3435
heleen.etzebeth@za.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation is known as wear andtear allowances, capital allowances ordepreciation.
Does the tax treatment follow book/statutory accounting depreciation?
No
Range of rates used
2%–100%Depreciation method used to calculate tax
deduction
Declining-balance and straight-line

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1. Entitlement to claim
Generally, only legal owners of the asset are entitled to claim depreciation, with the exception of:• Section 11(g) — leasehold improvements: improvements made by a lessee in terms of a contractual agreement may qualify fordeduction.
• Section 12N — when the Government or any other exempt entity owns the land or building, capital allowances would be allowed
on land or building improvements.

2. Allocation of tangible assets to tax depreciation lives andrates
For tax purposes, assets qualify for different sections/write-off periods depending on whether they are permanent or movable
assets. While permanent structures may qualify for building allowances (e.g., Sections 13, 13quin), movable assets (such asheating systems, partition walls, air conditioners, etc.) may qualify for shorter write-off periods in terms of Section 11(e).
Furthermore, Section 12C allows for a specific write-off period for assets used in the process of manufacture. Sections 37B and
37C allow for deductions relating to environmental conservation, maintenance and expenditure.

2.1 Assets that qualify for tax depreciation
Useful life and depreciation rates indicated below are a general indication. Specific fact patterns may determine different
depreciation rates.
Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Land

Disallowed

Disallowed

Disallowed

Plant, machineryand equipment (usedin the process ofmanufacture)

4 years

Straight-line method

40%/20%/20%/20%(new, unused and notapportioned)

Other plant, machineryand equipment (nonmanufacturing)

3–6 years

Motor cars (passenger
vehicles)Comments

20%/20%/20%/20%/20%(secondhand plantand machinery, notapportioned)

Only applicable for assets
used in manufacturing. Listsof processes of manufacture,processes similar to a processof manufacture and processes
not regarded as processes ofmanufacture are detailed in
the Income Tax Practice Note42, which can be found on theSouth African Revenue Service
website (sars.gov.za).

Straight-line method ordiminishing-value method

16.66%–33.33%

Apportioned daily

5 years

Straight-line method ordiminishing-value method

20% per year

Apportioned daily

Manufacturing

50/20 years

Straight-line method

2%/5% per year

Not apportioned

Urban developmentzones

4/5/7/11 years

Straight-line method

8%–25% per year

Not apportioned

Residential units

10 years

Straight-line method

5% per year

Not apportioned

Low-cost residential
units

10 years

Straight-line method

10% per year

Not apportioned

Commercial

20 years

Straight-line method

5% per year

Not apportioned

Hotels

50 years

Straight-line method

2% per year

Not apportioned

With reference to Note 47, theuseful life will be dependent on
the underlying asset.

Buildings andimprovements:

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South Africa

Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Comments

Furniture, fittings or
fixtures

6 years

Straight-line method ordiminishing-value method

16.66% per year

Apportioned daily

20% per year

Apportioned daily

33.33% per year

Apportioned daily

33.33% per year

Apportioned daily

100% over one year

Apportioned daily

25% per year

Apportioned daily

Computer hardware:
Mainframe/servers

5 years

Personal

3 years

Computer software:
Purchased

3 years

Self-developed

1 year

Aircraft:

Straight-line method ordiminishing-value method

Straight-line method ordiminishing-value method

Straight-line method ordiminishing-value method

Light passenger

4 years

Commercial helicopters

4 years

25% per year

Apportioned daily

Aircraft and ships

5 years

20% per year

Not apportioned

33.33% per year

Apportioned daily

20% per year

Apportioned daily

Office equipment:
Electronic

3 years

Mechanical

5 years

Straight-line method ordiminishing-value method

Qualified leaseholder
improvement property:
Lease premiums

Lease premium/numberof years of lease
contract (limited to
25 years)

Straight-line method

Over the term of the lease
limited to 25 years

Apportioned monthly

Lessee: leasehold
improvements

Stipulated value incontract/number ofyears of lease contract(limited to 25 years)

Straight-line method

Over the term of the lease
limited to 25 years

Apportioned monthly

Farming andagricultural machineryand equipment:
Buildings

No deduction onbuildings

Movable assets

3 years

Straight-line method

50%/30%/20%

Not apportioned

Buildings

20 years

Straight-line method

5% per year

Not apportioned

Machinery and plant

3 years

Straight-line method

50%/30%/20%

Not apportioned; this waspreviously claimed under
Section 11D, but must be
claimed under Section 12C
going forward.

R&D expenditure

1 yearStraight-line method

150% of qualifying
expenditure

Claimed in the year incurred;
claiming this super deduction
requires preapproval from the
Department of Science andTechnology.

Property used in R&D:

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South Africa

Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Comments►

Deductions forenvironmental
expenditure:
Environment treatment
and recycling asset(owned by taxpayer)

4 years

Straight-line method

40%/20%/20%/20%

Utilized in the course of tradethat is ancillary to any processof manufacture.

Environmental waste
disposal asset

20 years

Straight-line method

5% per year

Must be required by law toprotect environment.

Buildings in urban
development zones:

If the building is purchasedfrom a developer, 55% of thepurchase price will be deemed
to be the cost to be used to
calculate the allowances.

Erection of newbuilding

11 years

Straight-line method

20% in year 1 + 8% peryear for 10 years

Erection of new lowcost residential unit

7 years

Straight-line method

25% in year 1 + 13% in
years 2–6 + 10% in year 7

Improvements

5 years

Straight-line method

20% per year

Improvement to lowcost residential unit

4 years

Straight-line method

25% per year

3 years

Straight-line method

50%/30%/20%

Not apportioned• More than
1 megawatt

3 years

Straight-line method

50%/30%/20%

Not apportioned• Not exceeding
1 megawatt

1 yearStraight-line method100%

Not apportioned

Concentrated solar
energy3 years

Straight-line method

50%/30%/20%

Not apportioned

Hydropower to produce
electricity of not morethan 30 megawatts

3 years

Straight-line method

50%/30%/20%

Not apportioned

Biomass composed oforganic wastes, landfill
gas or plant material

3 years

Straight-line method

50%/30%/20%

Not apportioned

Assets used in
production of biodieselor bioethanol

3 years

Straight-line method

50%/30%/20%

Not apportioned

If the building is improved by adeveloper, 30% of the purchaseprice will be deemed to be thecost to be used to calculate theallowances.

Assets used in
production ofrenewable energy:Wind power
Photovoltaic solar
energy of:

Mining assets and expenditure have separate sections in the South African Income Tax Act (Sections 15 and 36). For tax purposes,
expenditure incurred on mining assets may be fully deducted in the year the expense is incurred subject to certain requirements,
such as limitation of deductions to taxable income.

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Land does not qualify.

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South Africa

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Legal fees require analysis to determine whether they are capital or revenue in nature. If capital, the fees can be allocated to thecost of the asset and capital allowances claimed.

Own labor capitalized — work on developing software, for example, or carrying out work on property
Own labor is included in the cost of the asset/capitalized to the asset’s cost; the capital allowances claimed are based on the asset
classification.

2.4 Availability of immediate deductions for repairs, mining assets or small assets
Description

DetailAssets below a certain value

Small items less than ZAR7,000 can be written off in full in the year acquired and brought into use (subject tocertain requirements).

Repairs

See explanation below.

Mining assets

Certain mining assets may qualify for a 100% deduction in the year acquired, subject to certain requirements.

Repairs and maintenance vs. improvements
Section 11(d) provides a deduction with regard to repairs and maintenance on property actually incurred for purposes of the
taxpayer’s trade.
Improvements will be disallowed as an expense, and therefore capitalized to the asset’s cost and be written off over the same
write-off period as the asset.

3. Depreciation and calculation methods
Methods used

Declining-balance, straight-line or 40/20/20/20

Frequency

Section 11(e): with IN47 – general wear and tear allowances — daily basis
Section 12B: assets used for farming, production of renewable energy and productionof bio-fuels — annually
Section 12C: assets used by manufacturers or hotel keepers, assets used for storage
and packing of agricultural products, and for aircraft and ships, and machinery or
plant used for research and development — annually
Section 13: buildings — annually
Section 37B and 37C: environmental expenditure, conservation and maintenance —annually

Year of acquisition

Capital allowances can only be claimed from the date the asset is brought into use andnot from the acquisition date. Depending on the type of asset (and section applicable),the allowance can be apportioned daily or be claimed as a percentage for the year.

Year of disposal

Depending on the type of asset (and section applicable), the allowance can beapportioned daily or be claimed as a percentage for the year.

Ability to use different methods for different assets

The taxpayer may elect either the straight-line or diminishing-value method to write
off certain assets. The taxpayer may also elect to change the method from straightline or diminishing-value method without notifying the tax authorities. Proper records
must be kept in either case.

Ability to switch methods

See above.

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4. Preferential and enhanced depreciation availability
There are numerous incentives available to companies that invest in capital projects during a certain time period (mainly
manufacturing entities). These incentives may be cash grants or additional/accelerated allowances.

4.1. Tax allowance incentives
Small Business Corporations (Section 12E)
A “small business corporation” is:• Any close corporation or cooperative or any private company as defined in Section 1 of the Companies Act in which all holdersof the shares of the entity are natural persons• A corporation whose gross income for the year does not exceed ZAR20 million• One in which none of the shareholders or members hold any shares or any interest in the equity of any other company otherthan:• A listed company• Any portfolio in a collective investment scheme• A body corporate or share block company• Less than 5% of the interest in a primary savings cooperative bank or primary savings and loans cooperative bank
• Any friendly society• Less than 5% of the interest in a social or consumer cooperative or a burial society• A venture capital company• A dormant company, close corporation or cooperative• A company, close corporation or cooperative in the process of liquidation, windup or deregistration• One whose investment income plus income from rendering a personal service does not exceed more than 20% of the total of allreceipts and accruals of a revenue nature and all capital gains• A company that is not a personal service provider as defined
Manufacturing assets are 100% deductible in the year that the assets are brought into use.
Non-manufacturing assets are written off over three years (50/30/20) or written off in terms of the allowances provided for in
Section 11(e), depending on which one provides the most favorable deduction.

Buildings in special economic zones (Section 12S read with Section 12R)
A special economic zone, or SEZ, is a zone as defined by the Special Economic Zones Act by the Minister of Finance.
A qualifying company as defined in Section 12R will be allowed to receive a 10%-per-year capital allowance on the cost of any new
and unused building or any new and unused improvements to buildings owned by the qualifying company, and those buildings or
improvements are wholly and mainly used in the production of income within an SEZ in the course of the qualifying company’s
trade, other than the provision of residential accommodation.

Pipelines, transmission lines and railway lines (Section 12D)
This relates to expenditure actually incurred on acquisition of or improvements to pipelines, transmission lines or railway lines by
the legal owner that is new and unused and brought into use for the first time. Allowances can be claimed as follows:• 10% per year for pipelines used for transportation of natural oil• 6.67% on any line or cable used for the transmission of electronic communications• 5% annually for all other affected assets
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Industrial policy project additional investment and additional training allowance (Section 12I)
Additional investment allowance
In addition to the allowances already available to manufacturing entities in other sections of the act, an additional allowance may
be deducted by applying the following percentages to the cost of any new and unused manufacturing assets (hereinafter referred
to as assets) used in an industrial policy project (hereinafter referred to as project):• 55% of qualifying assets or a maximum of ZAR900 million investment allowance in the case of any greenfield project with apreferred status (100% if located in an SEZ)
• 35% of qualifying assets or a maximum of ZAR550 million investment allowance in the case of any other greenfield project (75%
if located in an SEZ)
• 55% of qualifying assets or a maximum of ZAR550 million investment allowance in the case of any brownfield project with apreferred status• 35% of qualifying assets or a maximum of ZAR350 million investment allowance in the case of any other brownfield project

Additional training allowanceIn the furtherance of an industrial policy project, an allowance limited to ZAR36,000 may be claimed for the cost of training
provided to employees. This allowance may not exceed ZAR30 million (for an industrial policy project with preferred status) andZAR20 million (for any other industrial policy project) within the six-year period from the date of approval.

4.2. Cash grant incentives
There are a number of cash incentives that are administered by the Department of Trade and Industry, and these incentives
typically tend to be industry-specific. Such cash incentives include, but are not limited to, the following:

Critical Infrastructure Programme (CIP) – cash grant• The CIP offers a minimum grant of 10% to a maximum of 30% of the total qualifying bulk infrastructural development costs up toa maximum of ZAR50 million.
• For projects that alleviate water and/or electricity dependency on the national grid (investment that is less dependent on
national grid), the CIP will also offer a minimum grant of 10% to a maximum of 50% up to a maximum of ZAR50 million.
• The applicant company must be at least a level 8 B-BBEE contributor in terms of the Codes of Good Practice for B-BBEE. Should
the applicant company not be at least a level 8 B-BBEE contributor, a grace period of 15 months after date of submission of theapplication is given for it to comply.
• The project must coincide with an investment project (defined fixed investment, expansion or sustain/refurbishment for the
existing fixed investment).
Infrastructure that should be considered:• Electricity lines and substations• Co-generation/renewable energy (not part of Renewable Energy Independent Power Producer Procurement Programme(REIPPPP)• Tar roads• Bridges• Water systems/reservoirs or purification• Railway• Infrastructure that alleviates water and/or electricity dependency on national grids

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Agro-processing support scheme
The five key focus areas of agro-processing/beneficiation operation are as follows:• Food and beverage value addition and processing (including Black winemakers)• Furniture manufacturing• Fiber processing• Feed production• Fertilizer production

Qualifying projects:• New and existing agro-processing/beneficiation projects
This can involve a wide range of processing or beneficiation activities of post-harvest that result in value addition and/or enhanced:• Storage life, such as cleaning, sorting, grading and waxing• Controlled ripening• Labeling• Packing and packaging• Warehousing• Canning• Freezing, freeze drying• Wood carving• Extrusion• Synthesizing• Polymerization• Various levels of processing that change agricultural product form. The forestry value-chain may also include sawing, pulping,
peeling and preservation.

Benefits:
Approved applicants can qualify for:• A 20% to 30% cost-sharing grant to a maximum of ZAR20 million• An additional 10% grant for projects that meet all economic benefit criteria• Available over a two-year investment period• Minimum amount of investment size to qualify for the grant is ZAR1 million (historical cost of assets less than ZAR10 million) or
ZAR10 million (historical cost of assets greater than ZAR10 million)
The grant will offer support on a cost-sharing basis toward:• Qualifying assets including machinery and equipment, commercial vehicles, buildings and improved costs
The grant will lead to the ability to claim between 20% and 30% of your investment spent on qualifying assets and investment cost(capped at ZAR20 million).

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Automotive Investment Scheme
This represents a cash grant of 20% plus an additional 5% to 10% (if the project significantly contributes to the development of theautomotive sector) of the cost of assets required to establish a new production facility or to expand an existing production facility.

Film and television production
1. Foreign Film and Television Production and Post-Production Incentive
Foreign-owned qualifying productions with a minimum of qualifying South African production expenditure (QSAPE) of ZAR12
million and above may qualify for a grant equal to 20% of QSAPE.
In instances in which the shooting location is in South Africa and post-production with qualifying South African post-production
expenditure (QSAPPE) of ZAR1.5 million occurs in South Africa, the incentive will be calculated on 22.5% of QSAPPE (additional2.5%).
Where post-production occurs outside of South Africa for a minimum number of two weeks, the incentive is calculated as follows:• The incentive is calculated at 22.5% of QSAPPE for foreign post-production with QSAPPE of ZAR1.5 million.
• The incentive is calculated at 25% of QSAPPE for a foreign post-production with QSAPPE of ZAR3 million and above.
If 100% of post-production is conducted in South Africa, the minimum requirement for the number of weeks will be waived.
If shooting on location in South Africa and conducting post-production with a QSAPPE of ZAR3 million and above in South Africa,
the incentive will be calculated as 25% of QSAPE and QSAPPE (an additional 5% will be added).
2. South African Film and Television Production and Co-Production Incentive
The incentive is available to qualifying South African productions and official treaty co-productions with a total production of
ZAR2.5 million and above. The incentive is calculated as 35% of the first ZAR6 million of QSAPE and 25% of the QSAPE on
amounts above ZAR6 million.

Other incentives
Tax depreciation method

Comment on specific application and benefits available

Assets used in R&D

Section 12C and Section 11D:
• Capital assets 50%/30%/20% allowance or 40%/20%/20%/20% or 20% per year over five years• Expenditure 100% + 50% additional (i.e., super allowance of 150%)

Assets used in farming or production ofrenewable energy (Section 12B)

A write-off period of 50%/30%/20% is allowed for the cost of and improvements to thefollowing assets:• Assets acquired for use in farming operations• Assets acquired for use in the production of biodiesel or bioethanol• Assets acquired for use in the generation of electricity from wind, solar power, hydropower andbiomass

Energy efficiency savings (Section 12L)

Section 12L provides for an energy-efficiency savings deduction of ZAR0.95 per kilowatt hour or
kilowatt hour equivalent.
Taxpayers are able to deduct all forms of energy-efficiency savings resulting from activities in the
production of income, provided they have a certificate issued by an institution, board or body,such as the Minister of Finance, Minister of Energy and Minister of Trade & Industry, all of which
will prescribe these regulations.

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5. Accounting for disposals
Recoupments (Section 8(4)): are triggered if the proceeds (below original cost price) received on disposal exceeds the tax value ofthe asset. Tax recoupment is included in the taxable income of the taxpayer.
The tax scrapping allowance will be allowed as an allowance and deducted from taxable income of the taxpayer if the proceeds
received on disposal are less than the tax value of the asset. This will only relate to assets in which the write-off period is less than
10 years.
Capital gains arise if the proceeds exceed the cost.

6. Making a claim
In South Africa, other than for an individual, submission of an annual tax return must be completed within 12 months from thefinancial year-end. Wear and tear and capital allowances are claimed as part of the income tax returns.
In practice, the tax authority can request that the taxpayer provide supporting documentation, such as audited annual financial
statements and supporting schedules of amounts being claimed on the return.

7. Intangible assets
Type of asset

Rates/lives

Trademarks, patents, copyright, design

Section 11(gB) provides a full deduction of expenditure actually incurred for theregistration or renewal of registration for trademarks, patents, copyright or designs.

Patents, copyright, design, know-how or similar items

Section 11(gC) provides a 5%-10% allowance per year in respect of expenditure
actually incurred to acquire an invention, patent, design, copyright or other similar
property.

Goodwill

No tax deduction is allowed for purchased goodwill.

License or permit

Section 11(gD) provides an allowance for expenditure incurred with regards togovernment business licenses for the provision of certain products or services overthe lesser of the term of the license or 30 years.

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South Korea
EY contact
Sung-Jun Kim+82 2 3787 6344
sung-jun.kim@kr.ey.com

At a glance
Terminology used by country todescribe the recovery of capital andfixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
In principle, yes. Although special rules
may be applied in certain circumstances,accounting depreciation is tax deductible
provided it is within the maximum
allowable limit computed based on theuseful life/depreciation method reported
to the tax office.
Range of rates used
Generally, 2.5% to 25.0%
Depreciation method used to calculate
tax deduction
Declining-balance, straight-line, units ofproduction

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1. Entitlement to claim
Legal owners are entitled to claim depreciation/amortization on assets. In the case of financial leases, the lessee is entitled toclaim depreciation/amortization on the leased assets.

2. Allocation of tangible assets to tax depreciation lives andrates
In general, corporations may depreciate tangible fixed assets using the straight-line, declining-balance or unit-of–production(output) depreciation methods. However, buildings and structures must be depreciated using the straight-line method. Intangible
assets must be amortized using the straight-line method with a few exceptions for which another depreciation method may apply(e.g., unit-of-production depreciation method may also be used for amortization of mining rights).
A corporation can elect to use one of the depreciation methods and useful lives specified in the tax laws and notify the tax officeof its choice in its first annual income tax return. If it does not elect a particular depreciation method or useful life, it must use thedepreciation method or useful life applicable to the respective class of asset as designated in the tax laws.
The depreciation methods and standard useful lives for the purpose of calculating the tax depreciation of each respective classof asset are laid out below. In general, useful lives of assets can be selected within the range of standard useful life ± 25% asprescribed in the tax laws.
The following are standard useful lives and methods of depreciation for fixed assets including fixtures and furniture (Appendix 5 to
the Enforcement Regulations to the Corporate Income Tax Law).
Asset type

Standard usefullife for tax

Type of tax depreciation method

Applicable tax depreciation rate

Vehicles and transportation
vehicles (excluding vehicles usedin transportation, machinery andconsumer products lease businesses),
tools and equipment

5 years

Straight-line method or decliningbalance method

20%/45.1%

Ships and aircraft (excluding ships andaircraft used in fishing, transportation,
machinery and consumer products
lease businesses)

12 years

Straight-line method or decliningbalance method

8.3%/22.1%

Buildings and structures made ofbricks, blocks, concrete, adobe, mudwall, wood, wooden mortar, etc.
(including attached fixtures)

20 years

Straight-line method

5%

Buildings and structures made of steel
frame, reinforced concrete, stone,
brickstone, etc. (including attachedfixtures)

40 years

Straight-line method

2.5%

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The following are standard useful lives and methods of depreciation for fixed assets deployed in specific industries (Appendix 6 tothe Enforcement Regulations to the Corporate Income Tax Law). For the manufacturing industry, a more specified level of industry
should be considered in order to determine the standard useful life for tax implications.
Industries

Subcategory of
manufacturing

Standard usefullife for tax

Type of tax depreciation
methodApplicable tax depreciation
rate

Manufacturing
Educational service

Manufacture ofleather, luggage
and footwear

4 years

Straight-line method or
declining-balance method

25%/52.8%

5 years

Straight-line method or
declining-balance method

20%/45.1%

6 years

Straight-line method or
declining-balance method

16.6%/39.4%

Manufacture ofpesticides andother agriculturalchemical products
Agriculture, forestry and fishing
MiningManufacturing
Sewage, garbage disposal
treatment, raw material recycling
and environmental restoration
Construction

Printing andreproduction ofrecorded media
Manufacture ofpharmaceuticals,
medicinal chemicals
and botanicalproducts

Wholesale and retailTransportation
Publishing, graphics, broadcastingand information services
Finance and insurance
Real estate and lease
Professional, scientific andtechnological services
Business facility management andbusiness support services
Public administration, national
defense and social security
Public health and social welfare
services
Arts, sports and leisure-related
services
Association and organization,
repair and other individual
services
Employment within family andother uncategorized selfconsumption activities
International and foreign bodies
Manufacturing industry
Mailing services

150

Manufactureof electronic
components,
computer, radio,
television andcommunicationequipment andapparatuses

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Industries

Subcategory of
manufacturing

Standard usefullife for tax

Type of tax depreciation
methodApplicable tax depreciation
rate

Manufacturing industry,
construction industry,transportation industry

Manufacture ofmagnetic andoptical medium

8 years

Straight-line method or
declining-balance method

12.5%/31.3%

Lodging and restaurant services

Manufacture ofapparel, clothing
accessories and fur
articles10 years

Straight-line method or
declining-balance method

10%/25.9%

Real estate and lease
Association and organization,
repair and other individual
services

Manufacture of raw
hides and tanningand dressing ofleather
Manufactureof chemicals
and chemical
products (except
pharmaceuticals,
medicinal
chemicals)

Agriculture, forestry and fishing
MiningManufacturing

Manufacture offood/beverages
Manufacture of
textiles, except
apparelManufacture ofwooden and paper
products
Manufacture of
rubber, plastic andmineral products
Manufacture ofelectronic coils,
transformers andother inductors
Manufacture of
explosives andpyrotechnic
products
Manufactureof basic metal
products
Manufacture ofother transport
equipment
Manufacture offurniture
Manufactureof electricalequipment andmachinery
Other
manufacturing

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Industries

Subcategory of
manufacturing

Standard usefullife for tax

Type of tax depreciation
methodApplicable tax depreciation
rate

Manufacturing

Manufacture of
tobacco products

12 years

Straight-line method or
declining-balance method

8.3%/22.1%

14 years

Straight-line method or
declining-balance method

7.1%/19.3%

Electricity, gas and steam

16 years

Straight-line method or
declining-balance method

6.2%/17.1%

Waterworks

20 years

Straight-line method or
declining-balance method

5%/14%

Transportation

Manufacture of
motor vehicles,
trailers andsemitrailers

Manufacturing

Manufacture ofcoke, hard-coaland lignite fuelbriquettes andrefined petroleum
products

2.1 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Land is excluded from fixed assets for depreciation purposes.

Assets not used forbusiness

While assets not used for business do not qualify for tax depreciation, idle facilities qualify for tax depreciation.

Assets underconstruction

Assets under construction are not subject to depreciation.

Assets whose values do
not decline over time

Examples include antiquities and fine art pieces.

2.2 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Incidental costs related to the acquisition of fixed assets are subject to depreciation, as they are included in the acquisition costs of
the related assets.

Land remediation
Costs in relation to land remediation are not included in acquisition costs of assets and, hence, are not subject to depreciation.

Capitalization of labor — personnel expenses incurred to develop or improve products, process, systems, etc.,
prior to commercial production or use
Payroll and other payroll-related costs of employees directly involved in the development are included in development costs andare subject to depreciation/amortization.

2.3 Availability of immediate deductions for repairs
If a corporation deducts expenses incurred for the acquisition of fixed assets or expenditures that should be capitalized, these are
deemed as asset acquisitions and will also be subject to tax depreciation.

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South Korea“Capital expenditures” refer to repair costs spent in order to extend the useful life of depreciable assets of a corporation or to raise
the real value of the relevant assets. Capital expenditures shall include the following:• Restructuring to change the original use• Installation of elevators or cooling/heating equipment• Installation of evacuation facilities in a building, etc.
• Restoration of buildings, machinery, facilities and equipment damaged or destroyed by a disaster or accident to the extent thatthey cannot be used for their original purposes• Other improvements, expansions or installations that are similar in nature to those listed in the above
However, if a corporation incurs any of the following repair costs, the repair costs may be expended in the business year in which
they occur:• If the amount expended as repair costs for each asset is less than KRW3 million• If the amount expended as repair costs for each asset is less than 5/100 of financial book value as at the end date of theimmediately preceding business year
• If repair costs are periodically expended with intervals of less than three years
Furthermore, acquisition costs of depreciable assets that amount to not more than KRW1 million per unit may be expended as aperiodic expense unless the assets are acquired in high volume or are used for the commencement or expansion of business.

3. Depreciation and calculation methods
Methods used

Declining-balance, straight-line, unit-of-production methods

Frequency

Monthly
If the business year is less than one year, the depreciation amount allowed under
the Korean tax laws is the amount calculated by multiplying the allowed depreciation
amount by the number of months in the relevant business year and dividing it by
12. In such cases, the number of months shall be calculated by the calendar, and theremaining number of days less than one month shall be deemed as one month.

Year of acquisition

The depreciation of fixed assets can be calculated from the month in which the fixed
assets are put into use.

Year of disposal

The depreciation is calculated until the month preceding the month in which the fixed
assets are written off or sold.

Ability to use different methods for different assets

The identical method must be applied to the same class of assets.

Ability to switch methods of conditions set by the
Korean tax laws

Provided certain conditions prescribed under the Korean tax laws are met,
depreciation methods may be changed after obtaining approval from the head of the
district tax office.

4. Preferential and enhanced depreciation availability
Although enhanced or accelerated depreciation is not granted as reward for investment, useful lives of certain qualified assets may
be adjusted by a maximum of 50%.

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In any of the following cases, a corporation may apply a useful life that is within a range of plus or minus 50% of the standard
useful life upon obtaining an approval from the Regional Tax Office (for fifth and sixth items below, a range of plus or minus 25% of
the standard useful life may apply).
1. If the degree of corrosion, wear and tear, or damage of the assets is considerable due to the nature of the business
2. For corporations that have been in business for at least three consecutive years, if the rate of operation of production for the
relevant business year is considerably higher than the average rate of operation for the preceding three business years
3. If accelerated depreciation of existing production facilities is required on the grounds of the development, distribution, etc., of
new production technology and new products
4. If operations are suspended or the rate of operation of production facilities is reduced due to changes in economic conditions
5. Where the change in useful life is made subsequent to the first year of adoption of the international accounting standards
6. If the standard useful life of the depreciable asset is changed in the tax laws
Upon acquiring used assets (i.e., assets that are left with less than 50% of the standard useful life prescribed in the tax law), thecompany may elect to use a useful life for the used assets that can be shortened to 50% of the standard useful life by filing anapplication to the district tax office.

5. Accounting for disposals
The difference between the selling price and the book value of the fixed (including intangible asset) asset is recognized as a gain orloss upon disposal.

6. Special depreciation rules for business cars
Business cars
Business cars refer to all vehicles that are subject to individual consumption tax and may be used for both business-related andnon-business-related purposes.

Tax treatment and tax deductibility of business-use vehicles
The newly amended Korean tax law requires taxpayers to maintain the operation records of a business-use car in order to deduct
expenses related to the business-use car, which include depreciation expense, rental expense, fuel, insurance, repairs, property
tax, toll fees and interest expense on the financial lease obligation. In the absence of the operation records, taxpayers shall beallowed to deduct the actual expenses occurred related to the business use of the car or KRW10 million, whichever is less. This
newly amended provision for business-use vehicles above does not apply to the vehicles used for transportation business, car sales
and lease business, security business etc.

Annual depreciation limits
The allowable depreciation per year is limited to the depreciation expense multiplied by the business-use percentage, which shallnot exceed KRW8 million per vehicle. The depreciation expense exceeding the limit can be carried forward to subsequent tax years
and be deducted when depreciation expenses multiplied by the business-use percentage is less than the tax limit of KRW8 million.

Loss from the disposal of business-use vehicles
Loss from the disposal of business-use vehicles is subject to a deductibility limit, which is KRW8 million per year per vehicle.

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7. Making a claimTax depreciation is incorporated into the annual corporate income tax return.

8. Intangible assets
The following are standard useful lives and method of depreciation for intangible assets (Appendix 3 to the Enforcement
Regulations to the Corporate Income Tax Law).
Type of asset

Rates/lives

Trademarks

5 years

Patents, copyrights, design, know-how or similar items

Patents (7 years); copyright (depending on the term of copyright); design (5 years);
know-how (5 years)

Goodwill

5 years

License or permit

5 years (if treated as goodwill)

Other (please provide details)

Useful life of 10 years:
Fishing rights, gathering rights under the Submarine Mineral Resources Development
Act (unit-of-production method may be used), toll road management rights, irrigationrights, electricity and gas provision facility usage rights, industrial waterworks usage
rights, waterworks usage rights and heating provision facility management rights
Useful life of 20 years:
Mining rights (unit-of-production method may be used), telephone and telegraphexclusive-use facility rights, exclusive rail line usage rights, sewage treatment anddisposal plant management rights, and waterworks facility management rights
Useful life of 50 years:
Dam usage rights

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SpainEY contact
Víctor Gómez de la Cruz Talegon+34 9157 27385
victor.gomezdelacruztalegon@es.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation or amortization
Does the tax treatment follow book/statutory accounting depreciation?
Yes, for tax purposes, accounting
depreciation is tax-deductible provided
it is within the maximum allowable limit
set by Spain’s corporate income tax (CIT)
regulations.
Range of rates used
0%–50%
Depreciation method used to calculate tax
deduction
Straight-line/prime cost, sum–of–the–years’–digits method, double diminishing(declining) method — constant percentage,a depreciation plan approved by the
Spanish tax authority, accelerated
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1. Entitlement to claim
Taxpayers who have registered the assets in their balance sheet are entitled to claim depreciation.

2. Allocation of tangible assets to tax depreciation
lives and rates
Tax depreciation should be applied element by element, i.e., companies are required to distinguish between parts of the building
and apply different lives/rates to each part (furniture, air conditioning units, etc.). However, elements that are similar in nature orused in the same way may be depreciated together if it is possible to know the accumulated depreciation of each element at every
moment.
Maximum depreciation rates for tax purposes are fixed by law. The rates vary depending on the industry. The Spanish tax reform
has amended the table of assets and the lives/rates.

2.1 Assets that qualify for tax depreciation
Useful life and depreciation rates indicated below are a general indication. Specific fact patterns may determine different
depreciation rates.
Asset type

Maximum useful life
for tax

Type of tax depreciation
methodMaximum applicable tax
depreciation rate

Comments

Plant, machinery andequipment

14–40 years

To be chosen by the
taxpayer

5%–15%

It depends on the specifickind of asset.

Motor cars

14 years

To be chosen by the
taxpayer

16%

Buildings

68–100 years

Sum–of–the–years’–digits
method and constantpercentage method (seedefinitions below) cannot
be applied.

2%–3%

It depends on whether
the building is used
for warehousing or
administrative purposes.

Furniture, fittings or
fixtures

4–20 years

Sum–of–the–years’–digits
method and constantpercentage method
cannot be applied.

10%–50%It depends on the specifickind of asset.

Computer hardware

8 years

To be chosen by the
taxpayer

25%

Computer software

6 years

To be chosen by the
taxpayer

33%

Aircraft

20 years

To be chosen by the
taxpayer

10%

Transport other thanmotor cars

10–25 years

To be chosen by the
taxpayer

8%–20%

Car parks

100 years

To be chosen by the
taxpayer

2%

Office equipment

20 years

Sum–of–the–years’-digits
method and constantpercentage method
cannot be applied.

10%

It depends on the specifickind of asset.

It depends on the specific
type of asset.

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SpainAsset type

Maximum useful life
for tax

Type of tax depreciation
methodMaximum applicable tax
depreciation rate

Land improvements

N/A

N/A

0%

Qualified leaseholder
improvement property

N/A

N/A

0%

Agricultural machineryand equipment

18 years

To be chosen by the
taxpayer

12%

Property used in R&D

Comments

Accelerated depreciation
allowed

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

The purchase price of undeveloped land shall include land preparation costs, such as
enclosures, excavation, purification and drainage, demolition when required for new building
construction, inspection costs and plans drawn up prior to the purchase, and, where applicable,
the initial estimate of the present value of existing obligations associated with land restoration.
Land typically has an indefinite life and is, therefore, not depreciated. However, when theinitial value includes restoration costs, in compliance with the property, plant and equipment
standards, this portion of the land shall be depreciated over the period in which it generates
economic benefits as a result of having incurred these costs.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Such costs are deductible for CIT purposes.

Land remediation — removing asbestos, knotweed
It should increase the acquisition value of land, but not the deductible value for CIT purposes.

Own labor capitalized — work on developing software, for example, or carrying out work on property
Qualifying R&D capitalized expenses would be deductible for CIT purposes under the free depreciation regime.

2.4 Availability of immediate deductions for repairs
Generally speaking, an item of property, plant and equipment shall be considered impaired when its carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of the fair value of the asset, less costs to sell and its value in use. The
expense derived from write–offs will not be deductible for CIT purposes.
The Spanish regulations distinguish between repairs and improvements. The Spanish General Accounting Plan defines repairs as
amounts relating to the upkeep of assets to be registered as an expense, which would be deductible for CIT purposes.
However, costs incurred to renovate, expand or improve items of property, plant and equipment that increase capacity,
productivity or extend the useful life of the asset shall be capitalized as part of the cost of the related asset. Therefore,
improvements would be tax depreciated according to the pending useful years, and the depreciation method applies to the linked
asset.

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SpainFor fiscal years 2013 and 2014, for entities with revenue exceeding EUR10 million, a temporary restriction has applied to theamortization or depreciation for tax purposes of fixed, intangible and real estate assets. Under this restriction, the tax-deductible
expense was limited to 70% of the maximum depreciation or amortization amount, according to CIT regulations.
Depreciation expenses may be taken on a straight-line basis over a period of 10 years (or, if the taxpayer so chooses, the asset’s
useful life) starting from 2015.

3. Depreciation and calculation methods
Methods used

Straight-line/prime cost, sum–of–the–years’–digits method, double diminishing (declining) method —constant percentage, a depreciation plan approved by the Spanish tax authority, accelerated depreciationin certain industries (e.g., mining)

Frequency

Annually
Depreciation is calculated on an ongoing basis. For instance, ongoing depreciation will have to be taken
into consideration for filing the payments on account for CIT purposes.
Listed below are definitions of the abovementioned methods:• Straight–line method: results from the application of linear amortization rates in the officially approved
amortization schedules and may be used for any depreciable asset. Companies may use higher rates ifthey can demonstrate that the actual depreciation is more than what the law allows. Additionally, thementioned rates may be higher for assets used in more than a single shift worked and for secondhand
assets that the company acquired.
• The sum–of–the–years’–digits method may be used for all assets except building, furniture andhousehold goods.
• The constant percentage method is determined by weighting the linear amortization rate obtained fromthe amortization period that is officially approved in the amortization schedules by the following rates:• 1.5 weighting — should the asset have a useful life shorter than five years• 2 weighting — should the asset have a useful life equal to or more than five years and less than eightyears• 2.5 weighting — should the asset have a useful life at least of eight years• A tax authority-approved depreciation plan: on request, tax authorities may grant approval for
accelerated depreciation if the company presents a plan specifying the assets, the date and priceof the acquisition, the depreciation rates and the annual depreciation allowance desired, andsupporting evidence for the granting of such a plan.

Year of acquisition

Generally speaking, depreciation is calculated from the time the asset(s) have been brought into operating
conditions or purchase. In the year of acquisition, the annual tax depreciation would be proportionallycalculated.

Year of disposal

In the year of disposal, the annual tax depreciation would be proportionally calculated. If an asset isowned for only part of the year, the depreciation is calculated in proportion to the number of months it
belonged to the taxpayer.

Ability to use different methods fordifferent assets

The method has to be chosen for each element during its useful life and not by each class of assets.

Ability to switch methods

Under certain conditions, the method may be changed. It has to be justified in the annual account as an
exceptional measure. Depending on the cause that required the change, it may impact the previously
submitted CIT form. If this is the case, an amendment should be requested or submitted.

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Spain4. Preferential and enhanced depreciation availability
Tangible and intangible fixed assets of certain companies (e.g., small- and medium-sized companies, labor-limited companies,
mining companies, priority-exploitation companies (explotaciones asociativas prioritarias)) can be depreciated under anaccelerated depreciation regime.
For financial lease contracts, under certain conditions, tax depreciation shall not be higher than the result of applying twice theofficially approved linear amortization rate corresponding to such asset. In addition, small- and medium-sized companies may
apply the coefficient of 1.5 to the specific tax depreciation for financial lease contracts.
Type of asset

Comment on specific application and benefits available

Tangible and intangible fixed assets of workers
for incorporated companies and labor-limited
liability companies

The assets assigned to the performance of these activities and acquired within the first five
years of their qualification can be depreciated under a free depreciation regime.

Assets used in R&D

Tangible and intangible assets, excluding buildings, assigned to development and investigation
activities can be amortized under a free depreciation regime.

Buildings assigned to R&D

They can be amortized, in equal parts, for a period of 10 years, if assigned to development
and investigation activities.

Industry-specific

Assets used by mining companies

Intangible assets

If it is not possible to make a reliable estimate of an asset’s useful life period, the amortization
rate for accounting purposes is set at 5%.

In addition, effective from 1 January 2015, new fixed assets can be freely depreciated on an annual basis if their unit cost is below
EUR300, with an overall cap of EUR25,000.

5. Accounting for disposals
When a company disposes of an asset for value, any difference between the accounting depreciation and the tax depreciation
should be taken into consideration when calculating the tax benefit or loss to be included in the annual tax return. When acompany scraps an asset for no value, the tax treatment would be the same, but the price-level adjustment would not beapplicable.

6. Making a claimTax depreciation is claimed in the CIT return.
Companies must be able to prove the acquisition value with the acquisition contract. In addition, the depreciation could be done by
any means allowed by the law.

7. Intangible assets
Generally, intangible assets may be amortized according to their useful life. If the useful life cannot be determined, intangible
assets may be amortized with a limit of 5% annually.
Type of asset

Rates/lives

Trademarks

5%

Patents, copyright, design, know–how or similar item

5% for intangible asset with limited useful life (e.g., patents, copyright)

Goodwill

5%

License or permit

5%

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Sweden

SwedenEY contacts
Carl Pihlgren+46 8 520 595 22
carl.pihlgren@se.ey.com

Marcel Sikkema+46 73 340 77 82
marcel.sikkema@se.ey.com

Henrik Fråhn

+46 73 374 89 28
henrik.frahn@se.ey.com

At a glance
Terminology used by country todescribe the recovery of capital andfixed assets
Tax depreciation (skattemässig
avskrivning)
Does the tax treatment follow book/statutory accounting depreciation?
Only for machinery and equipment whenthe 30% declining or 20% straight-line
method is used
Range of rates used
0%–30%
Depreciation method used to calculate
tax deduction
Declining-balance, straight-line (primecost), residual value

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Sweden

1. Entitlement to claim
The legal owners are generally entitled to claim.

2. Allocation of tangible assets to tax depreciation lives and
rates
Generally, companies are not required to break down assets. Special rules apply to buildings: if a building is constructed orpurchased, the company is allowed to distinguish between parts of the building and segregate these into the depreciation classes
defined in the Income Tax Act such as building, building equipment, connection fees, land equipment and land improvements. The
annual depreciation of the building is determined by the economic lifetime.
Buildings are subdivided as follows:
Type of building

Yearly deduction percentage

Detached houses

2%

Rental buildings
Car parks, malls, hotels and restaurant buildings

3%Stands/kiosks

5%

Other rental buildings

2%

Farm buildings
Greenhouses, silos, refrigerating buildings

5%

Other buildings

4%Power plant buildings
Thermal power generation buildings

4%

Hydroelectric power buildings

2%

Industrial buildings
Industrial buildings that are not set up for specific use

4%

Other industrial buildings that have only a limited usefulness for any
purpose other than that for which they are used; for example, gas stations,cold stores, dairies, slaughterhouses, sawmills and brickworks

5%

Special buildings

3%

Other buildings
Treat as industrial buildings

2.1 Assets that qualify for tax depreciation
Asset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Plant, machinery andequipment

5 years or 20–50
years depending on
category

As equipment or building

30% declining/20%
straight-line; 2%–5%annually

Motor cars

Classified asmachinery/equipment

Equipment

30% declining/20%
straight-line

Buildings

20–50 years

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2%–5% annually

Comments

SwedenAsset type

Useful life for tax

Type of tax depreciation
methodApplicable tax
depreciation rate

Furniture, fittings or
fixturesClassified asmachinery/equipment

Equipment

30% declining/20%
straight-line

Computer hardware

Classified asmachinery/equipment

Equipment

30% declining/20%
straight-line

Computer software

Classified asmachinery/equipment

Equipment

30% declining/20%
straight-line

Aircraft

Classified asmachinery/equipment

Equipment

30% declining/20%
straight-line

Transport other thanmotor cars

Classified asmachinery/equipment

Equipment

30% declining/20%
straight-line

Car parks

20 years

Office equipment(including office furnitureand fixtures)Classified asmachinery/equipment

Land improvements

20 years

Qualified leaseholder
improvement property

Building

Agricultural machineryand equipment

Classified asmachinery/equipment

Equipment

30% declining/20%
straight-line

Property used in R&D

Classified asmachinery/equipment

Equipment

30% declining/20%
straight-line

Comments

5% annuallyEquipment

30% declining/20%
straight-line
5% annually

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Land does not qualify because the value is not decreasing.

Artwork, etc.

Tax depreciation is not allowed for assets that can be assumed tohave a permanent value.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Deduction for preliminary costs can be made if the cost is considered to be an expense that can be allocated to a particular period
according to generally accepted accounting principles.

Land remediation — removing asbestos, Japanese knotweed
No general rules can be applied. Treatment depends on the specific conditions and situations in general.

Requirements for declining deprecation of 30%
To make a declining deprecation claim of 30% or a straight-line depreciation claim of 20% per year, the bookkeeping must conformwith generally accepted accounting standards, and the depreciation must be in line with the tax treatment. Deductions fordepreciation of own labor capitalized can be made if accepted according to generally accepted accounting principles.

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Sweden

2.4 Availability of immediate deductions
Description

DetailAssets with life of less than three years

Equipment with a general life-span of less than three years, typically mobile phones, etc.

Assets below a certain value

Below standardized amount, currently approximately SEK22,000

Repairs

Repairs to conserve the original condition“Extended repairs” on buildings

Changes that are considered “normal” within the business carried out by the owner of thebuilding and that should not constitute a significant change to the building

Assets that are acquired and disposed of in thesame year
Buildings for short–term use

Typically nonpermanent buildings, an example being temporary huts used at construction
sites• Legislation distinguishes between repairs and value-added improvements. Unlike repairs that can be written off immediately,
improvements that qualify as value-added improvements are added to the asset’s depreciable amount.
• Added improvements can, however, be considered as extended repairs. Extended repairs are changes in a building that areconsidered “normal” for the business carried out in the building, regardless of the book treatment.

3. Depreciation and calculation methods
Methods used

Reducing balance, straight-line/prime cost, residual value

Frequency

Annually

Year of acquisition

Depreciation of the asset if held at year-end is calculated, starting from date of use orpurchase of the building and in case of land improvements, starting from date of use.
Parts of the building qualifying as equipment can be depreciated as of the start of thefinancial year.

Year of disposal

No depreciation is available if not held at year-end.

Ability to use different methods for different assets

Yes

Ability to switch methods

Generally, only one method can be applied. Different methods can, however, be usedin different years for machinery, equipment and intangible assets, i.e., it is optional touse declining basis or straight line between years and it is possible to change methods
throughout the life-span of an asset.

4. Preferential and enhanced depreciation availability
Only assets connected to repairs and maintenance can be fully deducted immediately — see further below.

5. Accounting for disposals
The depreciation is not required to be the same for tax and accounting, except for machinery and equipment when the 30%
declining or 20% straight-line method is used.

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Sweden

6. Making a claim
Depreciation is claimed on an annual basis to the tax authority through the income tax return.

7. Intangible assets
Acquired intangible assets, including goodwill, can be depreciated by the same methods as for machinery and equipment: on astraight-line basis at 20% of cost annually, on declining balance basis at 30% of book value from previous year or by the “residual
tax value” method. Only one method can be used at the same time on the same type of asset. Intangible assets without a time
limitation cannot be depreciated at all.
Self–generated intangible assets and goodwill generated from mergers are depreciated in accordance with generally accepted
accounting standards. They cannot be depreciated with the abovementioned rates of 20% or 30%. Self-generated goodwill is nottreated as an asset on the balance sheet and can never be depreciated.
Type of asset

Rates

Trademarks

30% declining/20% straight-line

Patents, copyright, design, know–how or similar
item

30% declining/20% straight-line

Goodwill

30% declining/20% straight-line

License or permit

30% declining/20% straight-line

Other

30% declining/20% straight-line

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Turkey
EY contacts
Feridun Güngör

+90 212 408 5204
feridun.gungor@tr.ey.com

Ender Ersan+90 212 408 5173
ender.ersan@tr.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation
Does the tax treatment follow book/statutory accounting depreciation?
Yes
Range of rates used
1%–50%
Depreciation method used to calculate tax
deduction
Straight-line, double-diminishing(declining), depreciation in mines,
extraordinary depreciation

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1. Entitlement to claim
As a general rule, legal owners of assets are entitled to claim depreciation.
However, if one or more of the following conditions is met, those who lease assets are also entitled to claim depreciation for theseassets. In such cases, the subject asset is recorded as right in legal books, but for depreciation purposes, economical useful life
determined for the asset leased is considered:• Transferring ownership of the asset to the lessee at the end of leasing period• Providing the lessee with a right allowing it to purchase the asset with a value that is less than its market price at the end ofleasing period• Setting a leasing period that is longer than 80% of the economical useful life of the asset• Adding the sum of present values of lease payments to be made under leasing agreement being higher than 90% of the market
price of the asset

2. Allocation of tangible assets to tax depreciation lives
and rates
Granted the authority by Tax Procedure Code, the Ministry of Finance determines economical useful lives that should beconsidered while calculating depreciation based on the nature of asset and sector in which the asset subject to depreciation isused.
The Ministry of Finance has released a very detailed list that is approximately 730 lines and includes economical useful lives for
assets used in different sectors. In the event that an asset for which depreciation is claimed is not covered in this list, the taxpayer
is required to ask the Ministry of Finance officially to determine the specific economical useful life for this asset.

2.1 Assets that qualify for tax depreciation
The table below lists corresponding assets for which single economical useful life is determined by the Ministry of Finance.
Asset type

Useful life for tax

Type of tax depreciation method

Applicable tax
depreciation rate

Plant, machinery and equipment

By reference to complex listing

Motor cars

Five years

Straight-line or double-declining method20%

Aircraft

Six years

Straight-line or double-declining method

16.66%

Car parks

15 years (40 years for
multistory parking buildings)

Straight-line or double-declining method

6.66% (2.5% for multistory
parking buildings)

Land improvements

15 years (8 years for roads)

Straight-line or double-declining method

6.66% (12.5% for roads)

Qualified leaseholder improvement
property

Leasing period would be
useful life (in case no leasing
period is set, five years)

Straight-line method

In case economical useful life
is five years, 20%

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2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Vacant land

Vacant land does not qualify for tax depreciation because it is stipulated so in Tax Procedure
Code (assets that are not subject to wear and tear or devaluation are not covered in depreciation
application). Conversely, orchards formed in agriculture businesses, as well as lands on whichbuildings, roads or canals are established (the subject portion of the land that would be includedin the cost of the building, road or canal and for which depreciation is claimed) qualify for tax
depreciation.

Fixed assets under construction

Expenditures made for a fixed asset are to be followed up in fixed asset under construction
accounts and not subjected to depreciation until the construction of the relevant asset iscompleted and the asset becomes ready for use. Expenditures aggregated in fixed asset underconstruction accounts should be capitalized in (transferred to) relevant fixed asset accounts oncethe construction is completed and the asset becomes ready for use. The term of depreciation shallbegin in the year when the construction is completed and the capitalization is realized.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Expenditures incurred for making an asset ready to be used should be included in the cost of this asset in addition to acquisition
value and subjected to depreciation. For example, customs duties, transportation and assembly expenses for machinery andequipment are expenses that should be included in the cost of the integral parts and accessories of immovable, installations andmachinery, ships and other means of conveyance.
For constructed or manufactured assets, their building and production expenses shall serve as their acquisition value.
Taxpayers shall be free to include the expenses incurred in connection with notary public, court, valuation, commission, brokerage
and real estate transfer and special consumption taxes in the cost value to be subjected to depreciation or to treat them directly as
general expenses.
Land remediation — removing asbestos, Japanese knotweed
Expenditures arising from the demolition of an existing building upon its acquisition and the leveling of its plot (land remediation)
should be included in the cost of the immovable, in addition to the purchase price. Therefore, if a new building is constructed on
this land, the mentioned expenditures should be added to the cost value of the new building that shall be subject to depreciation.
Own labor capitalized — work on developing software, for example, or carrying out work on property
The cost of manufactured assets shall include the following elements:• The cost of primary and raw materials used for creating the manufactured asset• The cost of labor involved in the production of an asset• The portion of general production expenses corresponding to the asset• Any other expenses related to establishment of the asset

2.4 Availability of immediate deductions for repairs
Description

DetailAssets with life less than a certain period

Assets with life of more than one year and subject to wear and tear or devaluation should beredeemed through depreciation. Assets with life of less than one year can be treated directly as
expense. Economical useful lives are determined by the Ministry of Finance.

Assets below a certain value

This value/limit is set as TRY1,000 for 2018. This limit is considered collectively for assets
constituting unity and integrity from economical and technical aspects.

Repairs

Regular maintenance, repair and cleaning expenses shall be regarded directly as expense.

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Turkey• Regular repair refers to repair that does not enhance assets and increase their economical values continuously.
• Other than regular maintenance, repair and cleaning expenses, expenses incurred to enhance assets or continuously increase
their economic values shall be added to the cost of these assets and redeemed through depreciation.
• For example, expenses incurred to increase the speed of a ship, to expand or modify its passenger and cargo storage capacity at
the time of its acquisition, thus enhancing its economic value, or to replace the engine or body of a land transportation motor
vehicle or to incorporate a new component that it did not have at the time of its acquisition are expenses that must be includedin the cost.

3. Depreciation and calculation methods
Methods used

Straight-line method, double-diminishing (declining) method, depreciation in mines, extraordinary
depreciation

Frequency

Annually

Year of acquisition

Depreciation application regarding an asset is initiated with the capitalization of this asset.
Except for passenger cars, even if an asset is capitalized on the last day of a year, depreciation calculated
for the whole year of acquisition can be claimed in that year.
Depreciation for passenger cars has specific rules.

Year of disposal

No depreciation is calculated for the year of disposal.

Ability to use different methods fordifferent assets

Different methods can be applied to different assets without limitation. The same method must be
applied for all assets that create unity and integrity from economical and technical aspects.

Ability to switch methods

It is not possible to switch from the straight-line method to another method once this method has been
initiated. However, it is possible to shift from the double-declining method to the straight-line method.
The new method shall be taken into account as from the period related to the tax return containing
this statement. In case of switching from the double-declining method to the straight-line method, theportion of value that has not been depreciated yet shall be depreciated in equal portions by being divided
by the remaining term of depreciation.

4. Preferential and enhanced depreciation availability
R&D and innovation expenditures
The following expenses are considered within the scope of R&D/design and innovation activities:• Raw material and supplies expenses• Depreciation• Personnel expenses (i.e., salaries and wages)• General expenses• Benefits and services obtained from the outside (cannot exceed 20% of total R&D and innovation expenses)• Taxes, duties and charges that are directly related to R&D activities• All R&D and innovation expenditures incurred in “R&D or design centers” or in projects supported/approved by The Scientificand Technological Research Council of Turkey (TUBİTAK):• If the R&D center achieves at least a 20% increase compared with the previous year in any one of the indicators below:• Ratio of the R&D or design expenditure to the total turnover• Number of national or international patents registered• Number of projects supported internationallyWorldwide Capital and Fixed Assets Guide 2018169

Turkey• Ratio of the number of researchers with graduate degrees to the total number of R&D personnel• Ratio of the number of total researchers to the total R&D personnel• Ratio of the turnover generated from new products derived from R&D activities to the total turnover• Half of the increase of the R&D and innovation expenses of the current year (compared with the previous year) is also
considered within the scope of the R&D reduction.
The above cases shall be treated as deduction in the determination of taxable corporate profit. R&D deduction amounts that may
not be deducted due to insufficient income are carried forward to subsequent fiscal periods. Expenditures in the scope of R&D
and innovation activities shall also be depreciated through amortization by being capitalized under the Tax Procedures Code. (Thedepreciation rate is 20%.) In total, 200% of the relevant expenditures would be treated as deduction from the corporate tax base
(100% as R&D deduction and the other 100% through depreciation).
Under the Law, “R&D center” is described as the units within equity companies the legal or business headquarters of which arelocated in Turkey, including the establishments of nonresident entities in Turkey that:• Are organized in a separate unit and located within a single campus or physical space• Perform R&D activities in Turkey• Have adequate R&D management and technological assets, human resources, intellectual property, project and information
resources management capability and capacity• Have eligible projects with the subject, duration, budget and personnel needs defined• Employ at least 15 (30 for determined sectors) full-time R&D personnel who possess sufficient R&D experience and skills
Under the Law, design activities have been included in the scope of the incentives and support for R&D activities. The number ofminimum full-time equivalent personnel that can be employed at design centers is 10.
Corporate tax reduction for investments with incentive certificate (All the investments with incentive certificates do
not qualify for this application. Investment sectors and regions are mainly considered in determination of whether aninvestment qualifies for this application.)
The Corporate Tax Law sets the corporate tax rate as 20% (corporate tax rate is increased to 22% for periods 2018-20). The
reduced corporate tax application is an arrangement that ensures application of the corporate tax at a rate lower than 20% (22%for periods 2018-20) to gains from investments with incentive certificate.
A tax reduction shall be applied until the tax amount waived by the state reaches the investment contribution amount provided tothe investment.
In expanding investments, where the gains derived can be determined by being followed in separate accounts in the frameworkof the integrity of the business, the reduced rate is applied to these gains. If the gains cannot be separately determined, the gains
subject to a reduced rate shall be determined by proportioning the expanding investment amount to the total fixed asset amountregistered in the company’s assets at the end of the period (including amounts pertaining to ongoing investments). The term
“gains” refers to business profits derived by the investor, as stated in the opinions provided by the Ministry of Finance.

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Turkey

5. Accounting for disposals
The only way specified in the legislation to dispose of assets from the legal records is to sell them.
If depreciable economic assets are sold, the difference between the amount collected and their value registered in the inventory
register shall be transferred to the profit and loss account. The value of assets for which depreciation has been set aside is theamount remaining after the deduction of the depreciation set aside. Upon the realization of the sale, both capital asset andaggregated depreciation (previously claimed depreciation) accounts regarding the asset sold are eliminated from the legal records.
Transfer and barter are in the nature of sale.
If renewal of the economic assets sold is deemed necessary due to the nature of business or if the managers of the enterprise
have decided and taken action on this issue, the profit derived from the sale may be retained for a maximum of three years in aprovisional account in liabilities to cover the renewal expenses. Profits that have not been used during this term due to any reason
shall be added to the tax base of the third year. If the business is terminated or transferred or the enterprise is liquidated before
three years, these profits shall be added to the tax base of that year.
The profit used in the acquisition of new assets in the scope of the principles above shall be deducted from the depreciation to be
set aside on new assets according to the provisions of this law. After this deduction is completed, depreciation shall continue forthe assets that have not been amortized.
Scrapping an asset for no value is not allowed by the legislation. Instead, if an asset is sold as scrap, explanations made above for
disposing of an asset for value can be taken into account.

6. Making a claim
Depreciation claimed for each year should be booked in aggregated depreciation/depletion accounts and the relevant expense
accounts.
The cost of assets that constitute basis for depreciation should be substantiated with necessary documents and tables.
Lists, including detailed information for each asset subject to depreciation, may be requested by the tax authority to verify theaccuracy of the depreciation calculated by the tax payer.

7. Intangible assets
Intangible assets shall be redeemed through depreciation, again by considering economical useful lives set by the Ministry of
Finance.
Type of asset

Rates/lives

Trademarks

6.66%/15 years

Patents, copyright, design, know-how or similar item

6.66%/15 years

Goodwill

20%/5 years (only straight-line method is applicable)

License or permit

6.66%/15 years

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United Kingdom
EY contacts
Katie Selvey-Clinton+44 20 7951 3723
kselvey-clinton@uk.ey.com

Stephen Heath+44 20 7951 0035
smheath@uk.ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Capital allowances
Does the tax treatment follow book/statutory accounting depreciation?
Tangible assets — No (other than capitalized
repairs)
Intangible assets — Yes (for certain assets.
No longer available on business goodwill)
Range of rates used
0%–150%Depreciation method used to calculate tax
deduction
Declining-balance

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1. Entitlement to claim
In principle, capital allowances are available when a person (sole trader, partnership or body corporate) carrying on a businessactivity incurs qualifying capital expenditure.
Generally, a person must legally own an asset to claim allowances. However, a number of “deemed” ownership rules allow
entitlement to allowances under arrangements, such as leases, service agreements, hire purchase and contribution agreements. If
expenditures have been incurred on an asset that becomes part of the land or property (a fixture), it is necessary for the person tohave a relevant interest in the land prior to the asset being installed.

2. Allocation of tangible assets to tax depreciation
lives and rates
Claimants are required to break down assets into individual items to allow them to be categorized for capital allowances. It isnecessary, therefore, to have a detailed cost breakdown of all capital expenditures incurred, particularly with respect to buildings.
All depreciation of tangible fixed assets is disallowed when calculating taxable profit. The UK then provides a system of capitalallowances to obtain tax relief on qualifying expenditures. The main type of capital allowance is known as plant and machinery
allowances. There is no statutory definition of what constitutes plant for capital allowances purposes. Therefore, the capitalallowances treatment on various assets has been discussed and agreed in many test cases, and this identification can beparticularly complex as a result.

2.1 Assets that may qualify for tax depreciation
The writing down allowances (WDAs) or first-year allowances (FYAs) identified in the table below are calculated per year on adeclining-balance basis. Building works such as leasehold improvements should be analyzed so that allowances are allocated to thecorrect asset type.
Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Comments

Plant, machinery andequipment

N/A

Declining-balance

18% per year WDA — main pool

Main pool allowances areavailable on most types ofassets within this category.

8% per year WDA — special rate
pool

Furniture, fittings or
fixtures
Office equipment(including officefurniture and fixtures)

Motor cars

N/A

Declining-balance

The lower rate of relief applies
to integral features or itemsof plant that are expected tolast more than 25 years. Typesof integral features include
electrical systems, HVAC,
water installations and lifts.

The rate of depreciation
depends on the CO2 emissionsof the car
100% per year FYA – enhanced
capital allowances — 0–75 g/km
(0-50 g/km from 1 April 2018)
18% per year WDA — main pool
— 76–129 g/km (51 — 109 g/
km from 1 April 2018)
8% per year WDA — special ratepool — above 130 g/km (above
110 g/km from 1 April 2018)

Computer hardware
and software

N/A

Declining-balance

18% per year WDA — main pool

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Asset type

Useful life for tax

Type of tax
depreciation method

Applicable tax
depreciation rate

Comments

Aircraft

N/A

Declining-balance

18% per year WDA — main pool

The rate of relief depends on
the type of aircraft acquired.

8% per year WDA — special rate
pool
Commercial vehicles
and agricultural
machinery andequipment

N/A

Declining-balance

18% per year WDA — main pool

2.2 Assets that do not qualify for tax depreciation
Asset type

ExplanationLand

All costs relating to land

Dwellings

Usually no capital allowances if the expenditure is on a dwelling

Building

A building (which includes floors, walls, ceilings, doors, etc.) does not normally qualify, as it is the setting in whicha business carries on its qualifying activity, rather than the apparatus with which it carries on its qualifying activity.
There are some exceptions to this in very specific circumstances (such as a facility where R&D is carried out).
The definition of a building includes structural external works (such as car parks, roads and hard/soft landscaping).

Structures

Various structures including tunnels, bridges and dams

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planning
Preliminaries and professional fees should be attached with the asset to which they directly relate, and may be assessed for capitalallowances as long as they relate to plant and machinery. If the fees relate to a number of assets as part of a scheme of works, it isreasonable to apportion the costs over both qualifying and non-qualifying assets to which the fee relates.
Fees in respect of obtaining a legal interest in the property could be deemed to be too far removed from plant and machinery andare not likely to qualify for capital allowances.

Own labor capitalized
The treatment of such costs will typically follow the “treatment of the asset” that has been created as a result of the labor effort.

2.4 Availability of immediate deductions for repairs
The general position is that:• The cost of a repair is normally an allowable expenditure.
• The cost of replacing an asset or of making a significant improvement to an asset is a capital expenditure and not allowable as adeduction.
A deduction for expenditure on repairs is given when the cost of the repair is deducted in the profit and loss account in line withgenerally accepted accounting practice (whether that is UK GAAP or International Accounting Standards (IAS)). As a result, if a

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repair is capitalized for accounting purposes, the tax deduction will be given in line with the accounting depreciation charge overthe life of the asset.
Repairs do not include the cost of replacing the entirety of an asset or of making an improvement to an existing asset. There is abody of case law and tax authority guidance around this subject. There is a concept of nearest modern equivalent for tax purposes
when considering whether an asset has been improved. It is necessary to consider whether the asset’s character has changed
because of the work in determining whether expenditure is a repair.

3. Depreciation and calculation methods
Methods used

Declining-balance

Frequency

Writing down allowances calculated annuallyYear of acquisition

Full capital allowances available; WDAs calculated as per balance of relevant pool at
year-end

Year of disposal

Disposal proceeds deducted from relevant pool; a balancing adjustment may occur inthe year of disposal

Ability to use different methods for different assets

Not applicable

Ability to switch methods

Not applicable

4. Preferential and enhanced depreciation availability
Investments in certain asset types are rewarded with preferential and enhanced depreciation. The rates are set out below. In orderto encourage investment in certain areas, loss-making businesses may also have the opportunity to a payable credit in respectof unrelieved losses created by these enhanced reliefs (subject to a maximum). This applies to loss-making businesses that haveincurred expenditure on energy-saving or water-efficient assets or on the remediation of contaminated or derelict land.
Tax depreciation method

Description of relief

Specific application and benefits available

Annual investment allowance (AIA)

100% first-year allowance up to
specified limit

An annual first-year allowance is given to most companies andindividuals (but not partnerships with corporate members) for agiven amount of expenditure on plant and machinery per year. The
rates of relief are:
1 April 2014 to 31 December 2015 — GBP500,000
1 January 2016 onward — GBP200,000
The AIA should be time-apportioned for short and long chargeable
periods. The annual investment allowance operates on a groupbasis and allows companies within a group to allocate theallowance between group companies as they see fit. The AIA
should be allocated against assets attracting the lowest rate of tax
relief first.
The AIA cannot be used against assets acquired from a connected
party or on cars.

Assets used in R&D

100% allowance

Qualifying expenditure includes capital expenditure on carryingout development (R&D or providing facilities for R&D or researchdevelopment allowances (RDAs)) but does not include acquiring
R&D rights or rights arising out of R&D.

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Tax depreciation method

Description of relief

Specific application and benefits available

Energy/water-efficient assets(enhanced capital allowances or
ECAs)

100% first-year allowances

Listed technologies (such as boilers, motors, air conditioning)must appear on either the Energy Technology Product List or the
Water Technology List published by the Department of Energy andClimate Change (DECC) on the date expenditure was incurred.
Criteria-based technologies (such as lighting and pipe work
insulation) must meet certain performance criteria to qualify. The
technologies, product list and qualifying criteria change on anannual basis.
A loss-making company may surrender any relieved loss createdby ECAs and claim a payable tax credit equal to 19% of the loss
created, subject to various restrictions.
From 1 April 2018, this payable cash tax credit will reduce to twothirds of the prevailing UK corporation tax rate at the time theexpenditure is incurred. For example, if the prevailing corporation
tax rate is 19%, the payable tax credit will be equal to 12.67% of
the loss created, subject to the same restrictions.

Plant and machinery in designatedassisted areas

100% first-year allowances

Expenditure on plant and machinery in locations designatedas assisted areas (Enterprise Zones) and that have elected forpreferential capital allowances treatment
Expenditure must be incurred between 1 April 2012 and 31 March
2020. There are a number of restrictions on how the plant on
which allowances have been claimed can be used in the future.

Short-life asset

Balancing adjustment for any
remaining tax relief in year of
disposal

The short-life asset (SLA) legislation lets a taxpayer write off thecost of an asset over the life of the asset (up to eight years). It does
this by putting the expenditure in a single asset pool and having abalancing adjustment when the asset is disposed of or scrapped.
An asset is only a short-life asset if the taxpayer elects to treat it asone. Some assets are excluded from SLA treatment. If it turns outthat the asset is not a short-life asset, the expenditure in the SLA
pool is transferred to the main pool at the end of eight years.

Business Premises Renovation
Allowances (BPRA)

100% first-year allowance

Available for capital expenditure incurred between 11 April 2007
and 31 March 2017 (5 April 2017 for individuals). Allowances areavailable at 100% for qualifying expenditure on the renovation orconversion of unused business premises in a disadvantaged area
suitable for business use, subject to meeting certain criteria.

Land remediation relief

150% deduction for capital
expenditure

Examples can include remediation of asbestos, hydrocarbons andrenovation of derelict land.
Subject to certain restrictions, 150% of the qualifying expenditure
can be deducted for tax purposes. The person incurring theexpenditure must not be connected to the original contaminator.
The contamination must have arisen as a result of an industrial
activity.
A 24% payable cash tax credit may also be available if land
remediation causes a taxable loss, subject to restrictions.

5. Accounting for disposals
When an asset is disposed of, the company is required to bring in a disposal value that is deducted from the remaining unrelieved
balance of the relevant pool. The maximum amount that can be deducted from the relevant pool is limited to the original cost of
the asset. Capital allowances may then continue to be claimed on any remaining expenditure within the pools.

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If that disposal value brings the balance of that pool below zero, then a balancing charge will be realized in the year of disposal forthe excess. If an asset is in a single asset pool (e.g., a short-life asset election has been made), a balancing allowance or charge will
be available in the year of disposal, depending on the disposal value received.
When calculating the disposal value, a number of restrictions will apply if the disposal is to a connected party or is undervalued.
If the asset disposed of relates to the sale of a fixture to a third party, then the buyer and seller must enter into an election toagree on the value of the capital allowances to be transferred between the parties. The election must state what assets are beingtransferred and the value attributed to each capital allowances pool.

6. Making a claim
A claim is made in a person’s tax return that operates on a system of self-assessment. A claim can be made, amended andwithdrawn in most cases within two years of the end of the accounting period. There are a number of occasions in which a claim
could be made after this point; however, this will depend on the specific circumstances.
A claim should provide sufficient supporting information to substantiate the tax relief claimed and enable Her Majesty’s Revenue
and Customs (HMRC) to determine whether this has been calculated correctly. Should insufficient supporting information beprovided, the window in which HMRC could formally inquire into the tax computation could be extended.

7. Intangible assets
Effective 1 April 2002, relief is given for expenditure on certain intangible fixed assets (excluding goodwill) on the basis ofamortization shown in the accounts or (on election) at a fixed rate of 4% per year.
With respect to goodwill, from 8 July 2015, tax relief on the amortization of goodwill will no longer be received. If there isa disposal, on or after 8 July 2015, of goodwill that is subject to the new rules, any additional relief due for the qualifying
expenditure will be allowed as a non-trading deduction.
It is also possible to select software to be treated as eligible for plant and machinery allowances.
Type of asset

Rates/lives

Trademarks

Provided an asset is an intangible asset for accounting purposes and held for use on
a continuing basis in the course of the company’s activities, it should constitute an
intangible fixed asset. The corporate intangible assets regime links the tax treatment
to that applied in the accounts of the company in question. Under these general rules,
sums written off as intangible fixed assets are usually deductible as long as theirtreatment is compliant with the relevant accounting standard.
Alternatively, a company may make an election for fixed-rate deductions in respect ofa particular intangible fixed asset, regardless of its accounting treatment, and this isgiven at 4% per year.

Patents, copyright, design, know-how or similar item

Capital allowances are potentially available at 25% WDA per year on a reducing basis.

Goodwill

If goodwill is acquired from an unconnected party or created by a business between
1 April 2002 and 7July 2015, tax relief is available in line with the amortization
charged to the income statement or an election can be made for tax relief to bereceived at 4% per year.
As outlined above, from 8 July 2015, goodwill acquired from an unconnected third
party or created by a business already in existence before 1 April 2002 is a chargeable
gains asset. No UK tax depreciation is allowable, and tax relief for the expenditure
incurred is only given on the disposal of the old goodwill.

License or permit

The general rules for the corporate intangible assets regime as detailed above arefollowed.

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EY contacts
Scott T. Mackay+1 202 327 6069
scott.mackay@ey.com

Sam P. Weiler+1 614 232 7105
sam.weiler@ey.com

At a glance
Terminology used by country to describe
the recovery of capital and fixed assets
Tax depreciation is referred to as “taxdepreciation” in the United States.
Specifically, Section 167(a) of the Internal
Revenue Code (IRC) provides that
there shall be allowed as a depreciation
deduction a reasonable allowance for theexhaustion and wear and tear of property
used in a trade or business or of property
held for the production of income.
The terms “depreciation” and“amortization” generally are usedinterchangeably, although amortization
often (but not exclusively) is used to referto the recovery of basis related to eligible
intangible assets.
Does the tax treatment follow book/statutory accounting depreciation?
No, there is no book and tax conformity
requirement for federal income tax
purposes.
Range of rates used
0%–200%Depreciation method used to calculate tax
deduction
Declining-balance (e.g., 200% doubledeclining-balance method), straight-line

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1. Entitlement to claim
Taxpayers must own (i.e., possess the benefit and burdens of ownership, pursuant to a facts and circumstances determination) the
property in order to be allowed a depreciation deduction for federal income tax purposes.

2. Allocation of tangible assets to tax depreciation lives andrates
For federal income tax purposes, if a taxpayer is allowed a depreciation deduction, the deduction is generally computed using
the “applicable depreciation method, recovery period and convention.” The method, convention and recovery period used todepreciate tangible property depends on the type of property in question and whether such property is eligible to be depreciatedunder the general depreciation system (GDS), which generally results in accelerated depreciation deductions, or is required to be
depreciated under the alternative depreciation system (ADS) under Section 168(g), which generally results in slower recovery ofbasis. Most property is eligible to be depreciated under the GDS; however, certain property such as foreign use property is required
to use the ADS. Taxpayers also have the option to elect into ADS if they desire.
Generally, an asset is not broken down into components for purposes of computing tax depreciation. There are special rules,
however. For example, when a building is acquired, it is common to identify property items within the building that are separate
assets from the building and that may be required to be depreciated differently. For example, identifying furniture and fixtures thatare tangible personal property as opposed to the building, which is real property, is prevalent.
Revenue Procedure 87–56 generally provides the recovery period and class lives for tangible personal property. Sections 168(c)and (e) also provide guidance in determining the appropriate recovery period of tangible personal property as well as tangible real
property. Section 168(b) provides rules for determining the appropriate depreciation method. Section 168(d) provides rules fordetermining the appropriate placed in service and disposition convention.

2.1 Assets that qualify for tax depreciation
Asset type

Recovery period fortax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Plant, machinery andequipment

Varies, see Rev. Proc.
87–56

Varies, the general rule isthe 200% declining-balance(200% DB) method under
Section 168(b)The allowance isdetermined based on
the method, recovery
period and convention.

The recovery periods andmethods will vary dependingon what the property is used
for and whether the property
is subject to the ADS or GDS of
Section 168.

Automobiles

Generally, five years

Generally, 200% DB

The allowance isdetermined based on
the method, recovery
period and convention;
however, seedepreciation limitations
for luxury automobiles
pursuant to IRC Section
280F.

Assumes the use of GDS

Buildings

Generally, 39 years
for nonresidential real
property, 27.5 years
for residential rental
property, and 15 years
for qualified leasehold
improvement
property, qualified
retail improvement
property and qualified
restaurant property(see below)

Straight-line

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS

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Asset type

Recovery period fortax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Residential rental property

27.5 years

Straight-line

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS
and that property meetsrequirements to be treatedas residential rental property
pursuant to IRC Section 168(e)(2)(A)

Qualified leasehold
improvement property(QLHI)

15 years

Straight-line

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS
and that property meetsrequirements to be treated as
QLHI pursuant to IRC Section
168(e)(6). Repealed forproperty placed in service after
31 December 2017.

Qualified retail
improvement property(QRIP)

15 years

Straight-line

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS
and that property meetsrequirements to be treated as
QRIP pursuant to IRC Section
168(e)(8). Repealed forproperty placed in service after
31 December 2017.

Qualified restaurant
property (QRP)

15 years

Straight-line

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS
and that property meetsrequirements to be treated as
QRP pursuant to IRC Section
168(e)(7). Repealed forproperty placed in service after
31 December 2017.

Furniture, fittings or
fixtures

Generally, seven years
for office location
furniture, fixturesand equipment (seebelow); five years if forretail use assets thatare not in an officelocation

Generally, 200% DB

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS andthat assets fall under AssetClass 00.11 of Rev. Proc.
87–56 (or Asset Class 57.0 for
retail assets that are non-officelocation assets, such as store
shelving)

Computer hardware

Generally, five years

Generally, 200% DB

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS andassets that fit in Asset Class
00.12 of Rev. Proc. 87-56

Computer software

Generally, 36 months

Generally, straight-line

The allowance isdetermined basedon the method andrecovery period.

Assumes the software ispurchased and is not subject
to Section 197. Eligible selfdeveloped software may becurrently expensed.

Aircraft

Generally, five years
for aircraft not usedin commercial orcontract carrying ofpassengers

Generally, 200% DB

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS

Transport other thanmotor cars

VariesVaries depending on
recovery period

The allowance isdetermined based on
the method, recovery
period and convention.

Need to determine which asset
class under Rev. Proc. 87-56
applies

Car parks/parking garages

Generally, 39 years;
however, in certain
cases, parking lots
may qualify as land
improvements (seebelow)

Generally, straight-line

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS. This
property normally is classified
as nonresidential real property.

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Asset type

Recovery period fortax

Type of tax depreciation
methodApplicable tax
depreciation rate

Comments

Office equipment(including office furnitureand fixtures)

Generally, seven years

Generally, 200% DB

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS andthat the assets fall under AssetClass 00.11 of Rev. Proc.
87-56 because they are officelocation tangible personal
property

Land improvements

Generally, 15 years

Generally, 150% DB

The allowance isdetermined based on
the method, recovery
period and convention.

Assumes the use of GDS andthat the assets fall under AssetClass 00.3 of Rev. Proc. 87-56

Property used in R&D

Varies depending ontype of property anduse

Varies

The allowance isdetermined based on
the method, recovery
period and convention.

It is necessary to determine
which asset class the assets
fall under; however, generally,
personal property used in
R&D activities is eligible for a
five-year recovery period andthe 200% DB method (see IRC
Section 168(e)(3)(B)(v)).

2.2 Assets that do not qualify for tax depreciation
Types of assets

Explanation

Land

Land does not qualify because it is not subject to wear andtear, to decay or decline from natural causes to exhaustion,and to obsolescence. In contrast, land improvements with adeterminable useful life (such as parking lots and fences) aredepreciable.

2.3 Noteworthy items
Preliminary costs — architect fees, legal fees, planningThe origin of the costs will ultimately dictate tax treatment. However, costs incurred that directly benefit or that are incurred byreason of the production of property must be capitalized to the basis of such property under Section 263A. These costs may
include preproduction costs.

Land remediation — remediation activities
A detailed analysis of the costs at issue must be performed to ascertain the proper tax treatment of land remediation costs. For
instance, if a new depreciable asset is created from the remediation activities, such costs must be capitalized and depreciated.

Own labor capitalized — carrying out work on tangible property
Generally, internal labor is not required to be capitalized for tangible property acquired. See Treas. Reg. Section 1.263(a)-2.
However, internal labor is required to be capitalized to property produced for sale or used in a taxpayer’s business under Section
263A.

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2.4 Availability of immediate deductions for bonus depreciation property and for eligible tangible
property repairs
Description

DetailBonus depreciation under Section 168(k)Generally, eligible property includes MACRS property with a recovery period of 20 years orless and certain computer software (although certain other property may qualify as well,depending on the date acquired and placed in service). Property is generally treated asacquired no later than the date on which the taxpayer enters into a written binding contract
to acquire such property.
Property acquired prior to 28 September 2017
For eligible property acquired prior to 28 September 2017 and placed in service between
1 January 2016 and 31 December 2017, the bonus depreciation allowance is equal to 50%of the adjusted basis of the eligible property. There is a phase-down of the allowance to 40%
for property placed in service during calendar year 2018 and to 30% for property placed inservice during calendar year 2019. Special bonus depreciation rules exist for certain longproduction-period property and certain aircraft.
*As it pertains to property placed in service before calendar year 2016, the bonus
depreciation rates and rules vary (i.e., the above rules should not be relied upon).
Property acquired after 27 September 2017
For eligible property acquired after 27 September 2017 and placed in service after 27
September 2017 and before 1 January 2023, the bonus depreciation allowance is equal to100% of the adjusted basis of the eligible property. There is a phase-down of the allowance
to 80% for property placed in service during calendar year 2023, 60% for property placed inservice during calendar year 2024, 40% for property placed in service during calendar year
2025, and 20% for property placed in service during calendar year 2026. Special bonus
depreciation rules exist for certain long-production-period property and certain aircraft.

De minimis safe harbor election

The de minimis safe harbor election allows taxpayers to follow their book capitalizationthresholds and deduct amounts up to USD5,000 (USD2,500 if the taxpayer does not have anapplicable financial statement) that are paid to acquire, produce or improve tangible property,
provided certain requirements are met. The de minimis safe harbor election is an annual,
irrevocable election made by attaching a statement to the timely filed (including extensions)federal tax return. See Treas. Reg. Section 1.263(a)-1(f) for more details.

Eligible repairs

Eligible repair expenditures for tangible property are deductible in the tax year incurred under
Treas. Reg. Section 1.162-4. Note the determination as to whether an expenditure is eligible
to be deducted as a repair is made by applying the improvement rules under Treas. Reg.
Section 1.263(a)-3 (see below for additional details).

Treas. Reg. Section 1.263(a)-3 sets forth the rules to determine whether an amount paid to repair, maintain or improve a unit ofproperty is required to be capitalized and depreciated or may be deducted in the year incurred. An expenditure can generally becurrently deducted if it does not result in a betterment to, the restoration of or a change in use of the underlying unit of property(assuming other provisions of the IRC, such as Section 263A relating to inventoriable costs, do not apply).
If a taxpayer applies the de minimis safe harbor election described in Treas. Reg. Section 1.263(a)-1(f), the amount must be
expensed for book purposes in order for a taxpayer to follow such treatment for federal income tax purposes (in addition to certain
other requirements of the safe harbor). Otherwise, treatment of costs for financial statement purposes alone would not govern
the treatment of costs for federal income tax purposes. The relevant case law and regulatory tax principles, including the clear
reflection of income doctrine, would determine the treatment of non-safe harbor de minimis amounts deducted for federal income
tax purposes.

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3. Depreciation and calculation methods
Methods used

Includes, but is not limited to, 200% DB and 150% DB and straight-line

Frequency

Annually over the asset’s proscribed recovery period
Depreciation is generally computed for each “tax year” of a taxpayer. A tax year may
be less than 12 months (“short tax year”); Rev. Proc. 89-15 provides guidance forcomputing depreciation related to property placed in service in a short tax year.

Year placed in service

Generally, the depreciation deduction in the year property is placed in service (i.e., theyear it is ready and available for its intended use in the taxpayer’s trade or business) is
computed by applying the appropriate convention, depreciation method and recovery
period. Generally, the appropriate convention is the half-year convention (unless the
mid-quarter, mid-month convention or full-month convention applies), which assumes
that the asset is placed in service halfway through the taxpayer’s tax year. Throughapplying such convention, the depreciation deduction is computed as if the tax year
is a full tax year and then the amount is reduced by 50%. If the half-year convention
is applied in the year of acquisition, it is also applied in the year of disposition in thesame manner. Other conventions include the mid-month convention (assume placed
in service in the middle of the month acquired), mid-quarter (assume placed in service
in the middle of the quarter acquired), and full month (assume placed in service on
the first day of the month acquired) for certain types of property. See Section 168(d)(for tangible property) and Sections 167 and 197 (for intangible property) and theunderlying regulations, which provide the rules for determining the appropriate
convention.

Year of disposal

A disposition occurs when ownership of an asset is transferred or when the asset ispermanently withdrawn from use either in the taxpayer’s business or in the productionof income. A disposition includes a sale, exchange, retirement, physical abandonment
or destruction of an asset. A disposition also occurs when an asset is transferred toa supplies, scrap or similar account, or when a portion of an asset is disposed of incertain circumstances (e.g., casualty event or an elective partial disposition).

Ability to use different methods for different assets

Elections can be made to depreciate property differently from the general rule. For
instance, taxpayers can elect for property that is required to be depreciated using the
200% DB method to depreciate it using the straight-line method.

Ability to switch methods

Generally, once a method is established for an asset, it must be used until the asset isretired, unless a change in accounting method is obtained for eligible method changes(e.g., a change from an improper to a proper recovery period). Another exception
would be if the use of the property changes during the recovery period (e.g., theproperty is moved outside of the US).

4. Preferential and enhanced depreciation availability
The general rule of depreciating personal property under the GDS under Section 168 provides for accelerated depreciation, i.e.,
the general rule is a 200% declining-balance method (twice that of straight-line). Certain personal property with longer recovery
periods or that are subject to the ADS are required to use slower depreciation recovery rates.
Tax depreciation method

Comment on specific application and benefits available

Personal property with a recovery period of less than 15 years

Generally, 200% DB under GDS

Personal property with a recovery period of 15 years or more

Generally, 150% DB under GDS

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5. Accounting for disposals
When an asset is disposed of for value, the adjusted basis of the asset (commonly referred to as the net tax value of the asset) is
recognized as an offset to proceeds received in the tax year of disposal. The IRS issued regulations under IRC Section 168 related
to full and partial dispositions of tangible property that generally are effective for tax years beginning in 2014; partial disposition
deductions are elective in certain cases.

6. Making a claim
Depreciation deductions are claimed on federal Form 4562 of a taxpayer’s federal income tax return.
We suggest that detailed records be kept supporting the depreciation deductions claimed on a taxpayer’s federal income tax
returns, including documentation of the cost of acquisition.

7. Intangible assets
If intangible assets are subject to Section 197 of the IRC, costs incurred to acquire such intangible assets are recovered ratably
over a period of 15 years, beginning in the month acquired. If intangible assets are subject to Section 167, the assets are generally
recovered ratably (with certain exceptions, such as the income forecast method under Section 167(g)), but the period of recovery
varies depending on the type of intangible asset.
Generally, for an intangible asset not subject to Section 197 to be eligible for amortization under Reg. Section 1.167(a)-3, a
taxpayer must establish that: (1) the intangible property has an ascertainable cost basis and also (2) that such property has alimited useful life, the duration of which can be ascertained with reasonable accuracy. See also Section 167(f) and Treas. Reg.
Section 1.167(a)-14, relating to intangible assets.
Type of asset

Rates

Trademarks

15 years under Section 197

Patents, copyright, design, know-how or similar
item

15 years under Section 197 or, if excluded from Section 197, see, generally, Section 167(f)and Treas. Reg. Section 1.167(a)-3 and 1.167(a)-14

Goodwill

15 years under Section 197

License or permit

15 years under Section 197 or, if excluded from Section 197, see Section 167(f) and Treas.
Reg. Section 1.167(a)-3 and Section 1.167(a)-14

Films, videotapes and other property specified
in Section 168(g)Generally, an “income forecast method” is utilized, whereby the recovery of basis throughamortization is calculated based on an income-based computation. The principal alternative
method is the straight-line method.

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Foreign currencies
The following list sets forth the names and currency codes for the currencies of countries discussed in thisguide.

Country

Currency

Currency code

Argentina

Peso

ARS

Australia

Dollar

AUD

BrazilReal

BRL

CanadaDollarCAD

China

Yuan Renminbi

CNY

FinlandEuro

EURFranceEuro

EUR

GermanyEuro

EUR

Greece

Euro

EUR

India

Rupee

INR

Italy

Euro

EUR

Japan

Yen

JPY

Kuwait

Dinar

KWD

Malaysia

Ringgit

MYR

MexicoPeso

MXN

Netherlands

Euro

EUR

Nigeria

Naira

NGN

NorwayNorwegian Krone

NOK

Portugal

Euro

EUR

RussiaRuble

RUR

Saudi Arabia

Riyal

SAR

Singapore

Dollar

SGD

South Africa

Rand

ZAR

South Korea

Won

KRW

Spain

Euro

EUR

SwedenSwedish Krona

SEK

TurkeyLira

TRY

United Kingdom

Pound

GBP

United States

Dollar

USD

Worldwide Capital and Fixed Assets Guide 2018

185

Contacts
Argentina

FinlandJapan

Gustavo Scravaglieri+54 11 4510 2224
gustavo.scravaglieri@ar.ey.com

Harri Pettersson+358 40 556 1921
harri.pettersson@fi.ey.com

Koichi Sekiya+81 3 3506 2447
koichi.sekiya@jp.ey.com

Australia

Johanna Männistö+358 50 466 5359
johanna.mannisto@fi.ey.com

Hideaki Furukawa+81 3 3506 2411
hideaki.furukawa@jp.ey.com

FranceMikihito Kuraya+81 3 3506 2411
mikihito.kuraya@jp.ey.com

Mark Dawson+61 2 8295 6194
mark.dawson@au.ey.com
Skye Richmond+61 3 9655 2646
skye.richmond@au.ey.com

Xavier Dange+33 1 55 61 11 28
xavier.dange@ey-avocats.com

BrazilArtur Prodan+33 1 55 61 17 18
artur.prodan@ey-avocats.com

Yeonki Ko+82 2 3787 4637
yeonki.ko@kr.ey.com

Germany

KuwaitWashington Coelho+55 11 2573 3446
washington.coelho@br.ey.com

Martin Brandscheid+49 6196 996 27342
martin.brandscheid@de.ey.com

Tuhin Chaturvedi+965 2295 5365
tuhin.chaturvedi@kw.ey.com

Jose Paulo S. Peixejose.peixe@br.ey.com

India

Malaysia

CanadaSunil Kapadia+91 22 619 20820
sunil.kapadia@in.ey.com

Robert Yoon
+60 19 337 0991
robert.yoon@my.ey.com

Rahul Patni+91 226 192 1544
rahul.patni@in.ey.com

MexicoFrederico H God+55 11 2573 3232
frederico.h.god@br.ey.com

Allan Bonvie+902 421 6256
allan.bonvie@ca.ey.com
Brett Copeland+902 421 6261
brett.copeland@ca.ey.com

China
Chuan Shi
+86 21 2228 4306
chuan.shi@cn.ey.com

186

Korea

Italy

Rodrigo Ochoa+52 555 283 1493
rodrigo.ochoa@mx.ey.com

Domenico Borzumato+39 02 85143503
domenico.borzumato@it.ey.com

Rodrigo Castellanos+52 555 283 1463
rodrigo.castellanos@mx.ey.com

Francesco Leone+39 02 85143573
francesco.leone@it.ey.com

Fernando Escamilla+52 555 283 1418
fernando.escamilla@mx.ey.com

Worldwide Capital and Fixed Assets Guide 2018

Netherlands
Wiebe Brink+31 88 407 3025
wiebe.brink@nl.ey.com
Simon Eftimov+31 88 407 7602
simon.eftimov@nl.ey.com

Nigeria
Temitope Samagbeyi+234 1 6314 500
temitope.samagbeyi@ng.ey.com

NorwayMarcel Sikkema+46 73 340 77 82
marcel.sikkema@se.ey.com
Harald Kjeldsen+47 2400 2400
harald.kjeldsen@no.ey.com

Portugal
Francisco Hamilton Pereira+351 217 912 749
francisco.hamilton-pereira@pt.ey.com

RussiaIvan Rodionov+7 495 755 9719
ivan.rodionov@ru.ey.com

TurkeyMirza Ashraf+966 11 215 9820
mirza.ashraf@sa.ey.com

Feridun Güngör
+90 212 408 5204
feridun.gungor@tr.ey.com

SingaporeEnder Ersan+90 212 408 5173
ender.ersan@tr.ey.com

Swee Thiam Teh+65 6309 8770
swee-thiam.teh@sg.ey.com

United Kingdom

South Africa

Katie Selvey-Clinton+44 20 7951 3723
kselvey-clinton@uk.ey.com

Gisela Pieterse+27 11 772 3352
gisela.pieterse@za.ey.com

Stephen Heath+44 20 7951 0035
smheath@uk.ey.com

Heleen Etzebeth+27 11 727 3435
heleen.etzebeth@za.ey.com

United States

Spain
Víctor Gómez de la Cruz Talegon+34 9157 27385
victor.gomezdelacruztalegon@es.ey.com

Scott T. Mackay+1 202 327 6069
scott.mackay@ey.com

SwedenCarl Pihlgren+46 8 520 595 22
carl.pihlgren@se.ey.com
David Sjöstrand+46 8 520 586 76
david.sjostrand@se.ey.com

Saudi Arabia

Marcel Sikkema+46 73 340 77 82
marcel.sikkema@se.ey.com

Imran Iqbal+966 11 215 9807
Imran.Iqbal@sa.ey.com

Henrik Fråhn
+46 73 374 89 28
henrik.frahn@se.ey.com

Worldwide Capital and Fixed Assets Guide 2018187

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