The historical cost of fixed assets and depreciation period must be defined for the depreciation of tangible fixed assets. Here is the determination of the period of depreciation of tangible fixed assets.
Determination of the period of depreciation of tangible fixed assets
In accordance with Article 10, Circular No. 45/2013/TT-BTC, the period of depreciation of tangible fixed assets is defined as follows:
Case 1: Not used fixed asset
- For new (not used) fixed assets, enterprises shall depend on the time frame of depreciation of fixed assets provided in Appendix 1 to Circular No. 45/2013/TT-BTC to determine the period of their depreciation.
Case 2: Used fixed asset
For used fixed assets, the period of their depreciation is determined as follows:
Period of depreciation of the fixed asset
The reasonable value of a fixed asset
Period of depreciation of brand-new fixed assets of the same type provided in Appendix I
The sale price of brand-new fixed assets of the same type (or equivalent type on the market)
- The reasonable value of fixed assets is:
+ The purchase price or actually exchanged value (in case of sale and purchase or exchange)
+ The residual value of the fixed assets or the value assessed by an organization with the valuation function (in case of being given, offered, donated, allocated or transferred), and other cases.
Change of the period of depreciation of fixed assets:
In case an enterprise wishes to determine the period of depreciation of new or used fixed assets different from the time frame of depreciation provided in Appendix 1, it shall prepare a plan on the following contents:
Step 1: The enterprise may make the change of the period of depreciation of fixed assets
The enterprise must prepare a plan for the change on the basis of a clear explanation of the following contents:
+ Technical useful life of fixed assets according to their design;
+ Present condition of fixed assets (time of use of fixed assets, asset generation and actual condition of assets);
+ The impact of the increase or decrease in the depreciation of fixed assets on production and business results and sources of capital for payment to credit institutions.
+ For assets formed from BOT and BCC investment projects, the enterprise shall supplement the contracts signed with the investors.
Step 2. Submit the plan on the change of the period of depreciation of fixed assets
Place of submission:
- The Ministry of Finance shall approve the plans prepared by:
+ Parent companies of economic groups, corporations and companies in which the State holds 51% or more of charter capital and which are established under decisions of ministries, sectors or the Prime Minister;
+ Subsidiaries in which their parent companies of economic groups or corporations hold 51% or more of charter capital.
- Provincial-level Finance Departments shall approve the plans prepared by Corporations and independent companies established under decisions of provincial-level People’s Committees, and enterprises of other economic
sectors having their head offices located in their localities.
Step 3: Enterprise informs the tax agencies
- On the basis of the approved plan on the change of the period of depreciation of fixed assets, within 20 days after the plan is approved, an enterprise shall notify it to the managing tax agency for monitoring and management.
- Enterprises may change the period of depreciation only once for each asset. The extension of the period of depreciation of a fixed asset must not exceed the technical useful life of the fixed asset and does not change the enterprise’s business results from profit to loss or vice versa in the year of making a decision on the change.
- If an enterprise changes the period of depreciation of fixed assets in contravention of regulations, the Ministry of Finance and the managing tax agency shall request the enterprise to re-determine the change according to regulations.
Determination of the period of depreciation of intangible fixed assets
In accordance with the Article 11, Circular No. 45/20138TT-BTC, the determination of the period of depreciation of intangible fixed assets is defined as follows:
- Enterprises may determine by themselves the period of depreciation of intangible fixed assets, which must not exceed 20 years.
For intangible fixed assets which are the value of land use rights with a definite term or the value of leased land use rights, the period of depreciation is the time during which enterprises are permitted to use land.
For example: The period of depreciation is 50 years for the rental land for the economic organization in the term of 50 years.
- For intangible fixed assets which are copyright, intellectual property rights, or rights to plant varieties, the period of depreciation is the term of protection stated on the titles of protection according to regulations (excluding the extended term of protection).