The concept of capital investments is directly related in accounting to the concept of fixed assets. Capital investments are nothing more than the costs of acquisition, manufacturing, reconstruction or expansion, design, and other similar costs associated with the operating system. In other words, we can say that fixed assets in accounting are the result of capital investments in them. The general concept of capital investments is contained in Federal Law-39 of 02/25/99, in Art. 1. Accounting for capital investments, however, has features depending on their nature. Tax accounting for such investments also requires a serious approach.
Question: How to reflect in the tenant's accounting capital investments (in the form of inseparable improvements) in a leased fixed asset (fixed asset) (movable property), made with the consent of the lessor, if, under the terms of the lease agreement, the costs of inseparable improvements are not reimbursed by the lessor? View answer
Capex structure
Based on the provisions of Federal Law-39, capital investments can be considered as a process of reproduction of fixed assets, accompanied by costs that are subject to accounting. To build an effective accounting system with all the variety of investments of this type, their correct grouping is important, on the basis of which analytical accounting of capital investments is built.
Question: The LLC transferred real estate (warehouse) as a contribution under a simple partnership agreement. For property tax purposes, who takes into account capital investments in the form of inseparable improvements to real estate made at the expense of the partnership: a simple partnership or LLC? View answer
It is advisable to build a classification taking into account the following characteristics:
- method of reproduction (construction, reconstruction, expansion, re-equipment, maintaining the operation of existing facilities, etc.);
- technology of costs (for construction, for the purchase of equipment, survey costs, investments in leased property, etc.);
- production and non-production nature of investments (depending on where the object is used).
In addition, capital investments are divided by sector of the economy (business), method of producing costs (in-house or by a third-party organization), readiness of the facility for use (whether it is completed or not completed by construction, reconstruction).
Question: How to reflect in the accounting of an organization engaged in freight transportation, capital investments in a fixed asset (fixed asset) (car) associated with its modernization? In order to improve the technical and operational qualities of the vehicle, the contracting organization (car repair shop) carried out work to install new equipment that would increase the vehicle's carrying capacity, improve its handling and traction properties. View answer
If capital investments are made in purchasing an OS, their cost is determined immediately. It is equal to the cost of purchasing the object. If capital investments are made during the process (for example, construction), until the end of the capital investments are considered unfinished, the value of the asset may increase by the value of the costs incurred.
Let us recall that the asset in which investments are made must be used in production for at least 1 year (PBU 6/01). Only in this case, investments are recognized as capital and are not taken into account in the company’s current expenses. They are collected in a separate BU account and then form the initial cost of the OS.
Question: When can expenses in the form of capital investments incurred during the validity of the preliminary lease agreement be taken into account for income tax purposes: before the conclusion of the main agreement or after (clause 1 of Article 256, clause 1 of Article 258 of the Tax Code of the Russian Federation)? View answer
Completing attachments
Capital investments upon their completion, that is, after bringing the object to a condition and location in which it is suitable for use for the intended purposes, are considered fixed assets.
And in the event of the actual start of operation of at least part of the object of their completion, the organization already recognizes them as an object of fixed assets.
If assets are disposed of or are not capable of bringing economic benefits to the company in the future, then they should be written off in accounting. Thus, the write-off of capital investments is determined, for example, by the transfer of property to another person in connection with its sale, exchange, transfer in the form of a contribution to the capital of another organization, transfer to a non-profit company, or the physical disposal of property due to its loss, natural disaster, fire, accidents and other emergency situations, as well as the cessation of capital investments in the absence of prospects for renewal or sale of unfinished objects.
Please note that capital investments are now written off in the reporting period in which they are disposed of or terminated with no prospect of renewal or sale.
For dismantling and disposal of facilities, such costs are recognized in the period in which they are incurred, unless a provision was previously recognized in respect of these costs. In this case, the difference between the sum of the book value of the investments being written off and the costs of their disposal, on the one hand, and the proceeds from their disposal, on the other hand, is recognized as an expense or income of the period in which such investments are written off.
Accounting
The accounting account used to accumulate capital costs, according to the chart of accounts, is active account 08. Sub-accounts are opened for it. 1, 2 - acquisition of plots and natural objects, 3, 4 - construction of environmental protection and acquisition, 8 - scientific, research, design work, 6, 7 - acquisition of animals and transfer of young animals to the main herd, etc.
The subaccounts given in the chart of accounts are advisory in nature. Additional subaccounts may be prescribed in the company's accounting policy.
Cost accounting is carried out for each investment object. When purchasing assets classified as fixed assets, an entry is made Dt 08 Kt 60. The accumulation of costs during the manufacture of an object is reflected in a number of entries corresponding to these actual costs (Ministry of Finance 91n dated 10/13/03): Dt 08 Kt 10, 02, 23, 60, 70, 71, 26, etc.
If, in the course of capital investments, equipment that requires installation work is purchased, account 07 is used before its operation begins. Installation costs are collected in the same way as the above posting: Dt 07 Kt of cost accounts. Then the finished equipment is transferred for installation with the entry Dt 08 Kt 07.
Both the installation of equipment and capital expenditures in general can be carried out using borrowed bank and other funds. The debit of accounts 07, 08 and the credit of accounts 66, 67, depending on the loan term, reflect the interest paid by the company. All interest is taken into account in capital investments before the asset is accepted for accounting in accounting. Other amounts that arose later are taken into account in current expenses (PBU 10/99 clause 11).
In addition to fixed assets, capital investment objects include intangible assets (account 04 BU, subaccount 5). Accounting for it is similar to accounting for capital investments in fixed assets.
Example: Capital investments were made in the purchase of an operating system worth RUB 300,000, incl. VAT 20%. Postings:
- Purchase: 08-60 - 250,000.00 rub., 19-60 - 50,000.00 rub.
- Commissioning: 01-08 — 250,000.00 rub.
- Reducing VAT debt: 68-19 - RUB 50,000.00.
Attention! Capital investments do not include long-term investments in securities, capital (MC) of third-party organizations.
The organization of accounting for capital investments is subject to the PBU of the Ministry of Finance (document No. 160 dated 12/30/93).
Accounting for capital investments: applicable accounts in accounting
According to the chart of accounts (Order of the Ministry of Finance of Russia dated October 31, 2000 No. 94n), an account is used to reflect information on capital expenditures on objects that will subsequently be accepted for accounting as fixed assets. 08 “Investments in non-current assets”. It is on it that all expenses incurred are collected, forming the initial cost of our asset. This account has several subaccounts for detailed accounting of costs incurred.
Comprehensive information about the account. 08 you will find in our publications:
- “08 accounting account (nuances)”;
- «On what line should account balance 08 be reflected in the balance sheet?”.
According to clause 8 of PBU 6/01, the initial cost of purchased fixed assets is formed by the total costs of their acquisition, creation and construction (less VAT and other refundable taxes). In this case, accounting is carried out object by object.
The accounting entry in this case looks like this:
Dt 08 Kt 60.
The rules for forming the initial cost of an asset manufactured by a company independently are given in clause 26 of the guidelines for accounting of fixed assets (Order of the Ministry of Finance of Russia dated October 13, 2003 No. 91n). According to the rules, the initial cost of an asset is the actual cost of producing it.
IMPORTANT! The procedure for accounting and forming capital expenditures for the production of fixed assets must correspond to the procedure that is determined for accounting for the costs of the corresponding types of products produced by the company.
The accounting entry for independently created assets will look like this:
Dt 08 Kt 10, 02, 07, 10, 23, 26, 60, 69, 70, 71, 76…
The creation (reconstruction, modernization) of an asset may be associated with the acquisition of equipment that requires its installation, or equipment that cannot be operated without prior installation (classic examples are equipment mounted on a foundation, connecting individual parts of a production line, etc.). Acceptance of such objects for accounting is reflected in the account. 07:
Dt 07 Kt 15, 23, 60, 71, 75, 76, 79, 86, 91.
As property is transferred for installation, it is transferred from the account. 07 on account 08:
Dt 08 Kt 07.
The process of creating a new facility (or reconstructing an existing one) can be very lengthy. This is due, in particular, to the phased method of accepting work, the long-term implementation of trial operation, which is carried out until the planned design parameters are achieved, and many other specific objective factors that take place in construction.
All this may require very large capital expenditures, which can only be accomplished with the help of borrowed funds. Interest on them will increase the book value of capital investments in assets:
Dt 07, 08 Kt 66, 67.
IMPORTANT! This rule applies only to those interests that were accrued before the asset was accepted for accounting. After this event, interest is charged to operating expenses (clause 11 of PBU 10/99).
After all capital costs for the facility are fully collected in the account. 08, it is considered ready for use, and its cost is transferred to the account. 01:
Dt 01 Kt 08.
More details about the account. 01 read the material “01 account in accounting (nuances)” .
Tax accounting
The initial cost of assets formed through capital investments does not include VAT and other refundable taxes of a similar nature.
Expenses attributed to depreciable property are not included in the calculation of income tax (Tax Code of the Russian Federation, Article 270-5), including the gratuitous transfer of capital investments (ibid., clause 16). Similarly, if there is an unfinished construction project that is subject to liquidation, the costs of this project are not taken into account in the income tax base (Tax Code of the Russian Federation, Art. 265).
When selling capital investments in the form of property (this should clearly follow from the sales agreement), its value is taken into account in the tax base. NU rules are set out in Art. 268 Tax Code of the Russian Federation. The cost of fixed assets is written off according to the rules of Art. 258, 259, 272 of the Tax Code of the Russian Federation.
The most important
- Capital investments are the costs of purchasing and any other reproduction of the operating system, including manufacturing, construction, etc.
- These costs before commissioning of the facility are taken into account on account 08 or 07, if we are talking about equipment and its preliminary installation.
- After the costs are collected on the debit of the account. 08 (or with the participation of account 07), they are reflected as the initial cost on the account. 01. The facility is put into operation.
- In the general case, such costs fall into the NU through depreciation charges after the commissioning of the OS.
- VAT and other refundable taxes are not taken into account in the capital investment and initial cost of the asset.
Tax accounting of expenses for capital investments
Starting from 2021, the criteria for recognizing property as depreciable for the purposes of calculating income tax have changed. From 2021, a new classification of fixed assets will be applied. From 2021, an investment tax deduction will be provided for expenses on the acquisition of fixed assets and expenses for their completion, reconstruction, modernization, and technical re-equipment.
The procedure for accounting for expenses for the acquisition (creation) of depreciable property is discussed with an interview with an expert - Sergei Razgulin, an actual state adviser of the Russian Federation, 3rd class.
Remind me of the quantitative criteria for classifying property as depreciable?
Depreciable property is property with a useful life of more than 12 months and an original cost of more than 100,000 rubles (clause 1 of Article 256 of the Tax Code of the Russian Federation). The indicated cost applies to facilities put into operation starting from January 1, 2021.
Depreciable property also includes intangible assets with a useful life of more than 12 months and an original cost of more than 100,000 rubles. This interpretation is set out in the explanation of the Ministry of Finance of Russia dated 09.09.2011 No. 03-03-10/86. At the same time, the Tax Code of the Russian Federation does not provide for an increase in the initial value of intangible assets as a result of additional equipment or modernization. (letters of the Ministry of Finance of Russia dated September 27, 2011 No. 03-03-06/1/595, dated April 26, 2017 No. 03-03-06/1/25101).
Are we talking about the paid price?
For the purposes of classifying property as a fixed asset when using the accrual method, the actual payment does not matter. Depreciation can be charged, for example, when purchasing property in installments, but provided that the initial cost of the property is formed, the property is accepted for accounting and put into operation (letter of the Ministry of Finance of Russia dated September 15, 2009 No. 03-03-06/2/170). Similarly, a depreciation bonus for acquired but not yet paid for property can be applied (letter of the Ministry of Finance of Russia dated August 16, 2010 No. 03-03-06/1/550).
At the same time, it is necessary to distinguish this situation from the situation when the property was received free of charge and its value is not included in non-operating income on the basis of paragraph 8 of Article 250 of the Tax Code of the Russian Federation. Accruing depreciation on such property will entail a tax risk, since, according to the Ministry of Finance, in such a situation the initial cost of the property is assumed to be zero (letter dated August 30, 2017 No. 03-07-08/55630).
By virtue of paragraph 9 of Article 258 of the Tax Code of the Russian Federation, the application of a depreciation bonus requires the taxpayer to bear expenses.
How are expenses for the acquisition of property reflected in accounting?
An organization can set a limit in its accounting policy on the cost of fixed assets, but not more than 40,000 rubles per unit. Then property, the value of which does not exceed the maximum amount, can be reflected in accounting and financial statements as part of inventories (clause 5 of the Accounting Regulations “Accounting for Fixed Assets” PBU 6/01, approved by Order of the Ministry of Finance of Russia dated March 30, 2001 No. 26n).
How to take into account in tax accounting the costs of acquiring property worth less than 100 thousand rubles?
From 2021, costs for the acquisition of property with an initial cost of less than 100,000 rubles are subject to inclusion in material costs in full as they are put into operation (subclause 3 of clause 1 of Article 254 of the Tax Code of the Russian Federation).
In addition, according to subparagraph 26 of paragraph 1 of Article 264 of the Tax Code of the Russian Federation, other expenses associated with production and sales include the costs of acquiring exclusive rights to computer programs worth less than 100 thousand, that is, less than the amount of the cost of depreciable property determined by paragraph 1 of the article 256 Tax Code of the Russian Federation.
For cost accounting purposes, is it possible to consider expenses for the acquisition of property and its installation separately, as independent types of expenses?
For the purposes of Chapter 25 of the Tax Code of the Russian Federation, fixed assets are understood as part of the property used as means of labor for the production and sale of goods (performing work, providing services) or for managing an organization, the initial cost of which exceeds 100,000 rubles (clause 1 of Article 257 of the Tax Code of the Russian Federation) . When a fixed asset is received by a taxpayer free of charge or identified as a result of an inventory, the initial cost is determined as a general rule as the market price of such property.
Please note that the initial cost of a fixed asset acquired on a reimbursable basis includes not only the amount of expenses for its acquisition, but also the costs of delivery, bringing it to a state in which it is suitable for use, with the exception of VAT and excise taxes (except for cases provided for by the Tax Code of the Russian Federation).
In other words, failure to include in the initial cost, for example, the cost of installation of purchased property, will result in an underestimation of the tax base for the tax in the corresponding period.
Tax risks exist when accounting as separate fixed assets for property that is intended for use as part of another object.
One-time accounting of expenses is possible if the cost of each purchased object does not exceed 100 thousand rubles, each object individually is capable of performing a certain function not only as part of other objects (“complex”), but also independently; from the documentation and technical characteristics of the equipment complex it should be possible to replace individual equipment with others without any damage to the entire system as a whole.
The direction of expenses incurred by the organization should also be important for qualifying expenses. If it follows from the primary documents that the purpose of the organization’s expenses was a single complex of property, and not individual components, then the possibility of independent use of one or several items, different periods of their use and other reasons are not of fundamental importance for recognizing the relevant items as components of a fixed asset.
Under such circumstances, a one-time write-off of expenses for the acquisition of individual parts may entail the risk of bringing the organization to liability under Article 122 of the Tax Code of the Russian Federation.
We also note that an object of fixed assets continues to be taken into account in tax accounting as depreciable property even if its use in activities aimed at generating income is suspended. When selling property taken out of service due to a decision to sell it, the tax base is determined as income from the sale reduced by the residual value of the property. The loss received from the sale is not accepted immediately, but in proportion to the remaining unselected useful life (clause 3 of Article 268 of the Tax Code of the Russian Federation).
At what point does depreciation begin?
Depreciation begins on the 1st day of the month following the month in which the facility was put into operation (clause 4 of Article 259 of the Tax Code of the Russian Federation).
Let me remind you that to begin calculating depreciation on objects of depreciable property, the rights to which are subject to state registration and which are put into operation from December 1, 2012, compliance with the conditions for submitting documents for registration of these rights is not required (Article 3.1 of the Federal Law of November 29, 2012 No. 206-FZ).
The Federal Tax Service allows expenses to be reflected in the current period in the form of depreciation amounts and depreciation bonuses relating to previous periods. To do this, the rules for correcting errors in calculating the tax base provided for in paragraph 1 of Article 54 of the Tax Code of the Russian Federation must be observed (letter No. SD-4-3/15906 dated August 11, 2017).
Has the approach to calculating useful life changed?
Depreciable property is distributed among depreciation groups in accordance with its useful life (clause 1 of Article 258 of the Tax Code of the Russian Federation).
The useful life is the period during which an item of fixed assets or an item of intangible assets serves to fulfill the goals of the taxpayer's activities.
The taxpayer independently determines the useful life as of the date of commissioning of the depreciable property. In this case, the inclusion of an object in the depreciation group is carried out according to the rules of Article 258 of the Tax Code of the Russian Federation and taking into account the Classification of fixed assets approved by Decree of the Government of the Russian Federation dated January 1, 2002 No. 1.
The classification of fixed assets uses the All-Russian Classifier of Fixed Assets (OKOF codes, names of its sections, subsections, classes, subclasses and individual types of fixed assets). Each unit of depreciable fixed assets is assigned a code corresponding to the lower level of the classification division, according to OKOF.
From January 1, 2021, the grouping of fixed assets by depreciation groups is based on the new All-Russian Classifier of Fixed Assets (OKOF) OK 013-2014 (Resolution of the Government of the Russian Federation dated July 7, 2016 No. 640).
When putting into operation fixed assets for which depreciation begins to accrue in 2021, the new edition of the Classification should be used. For fixed assets put into operation before January 1, 2021, the useful life determined by the taxpayer when they were put into operation is applied.
If the reconstruction, modernization, technical re-equipment of an object is carried out after January 1, 2021, then the taxpayer has the right to increase the useful life of such an object within the depreciation group in which the object was included in the previous edition of the Classification (letter of the Ministry of Finance of Russia dated November 11, 2016 No. 03- 03-06/1/66200).
How do the new and previous classifiers of fixed assets compare?
The objects of classification in OKOF are fixed assets (produced assets used repeatedly or continuously over a long period of time, but not less than one year, for the production of goods and provision of services).
Order of Rosstandart dated April 21, 2016 No. 458 approved direct and reverse transition keys between editions OK 013-94 and OK 013-2014 (SNS 2008) of the All-Russian Classifier of Fixed Assets.
The transition key consists of a direct transition key from the previous OKOF (OK 013-94) to the new OKOF (OK 013-2014 (SNS 2008)) Volume 1 and a reverse transition key from the new OKOF to the former OKOF Volume 2.
The direct transition key is presented in the form of a table, which shows the codes and names of positions of the previous and new OKOF. In the transition key, each position of the previous OKOF is matched to one or more positions of the new OKOF.
But it is not always possible to establish correct compliance with the Classification. In particular, the new edition of depreciation groups does not contain instructions regarding office furniture. In accordance with the transition keys for furniture, code 330.31.01.1 according to OK 013-2014 is used (code name “Furniture for offices and trade enterprises”). Since there is no code 330.31.01.1 in Resolution No. 1, it is possible to use the top-level code 330.00.00.00.000 (Other machinery and equipment, including household equipment, and other objects). But in the Classification this is the sixth group (property with a useful life of over 10 years up to 15 years inclusive). Previously, it was envisaged that furniture for administrative premises should be classified as depreciation group 4.
When several depreciation groups contain the same code, when assigning an object to a depreciation group, one should take into account the notes related to the corresponding group, as well as the provisions of paragraph 6 of Article 258 of the Tax Code of the Russian Federation on the application of the useful life of the object according to technical specifications (manufacturers' recommendations).
If a fixed asset is intended to perform several specific independent functions at once, it is necessary to proceed from the maximum depreciation group and useful life.
An organization wants to modernize a fully depreciated fixed asset. How to take into account expenses if the cost of such modernization is less than 100,000 rubles?
The initial cost of a fixed asset changes in cases of completion, additional equipment, reconstruction, modernization, technical re-equipment, partial liquidation of an object and for other similar reasons (clause 2 of Article 257 of the Tax Code of the Russian Federation).
The Tax Code of the Russian Federation has not determined the minimum amount of modernization (letter of the Ministry of Finance of Russia dated September 10, 2009 No. 03-03-06/2/2167). Any modernization leads to a change in the initial cost of the fixed asset.
When a fixed asset is fully depreciated and modernized, the initial cost of such a fixed asset is increased by the cost of modernization. The cost of the modernization carried out will be depreciated according to the standards that were determined when the fixed asset was put into operation (letter of the Ministry of Finance of Russia dated July 25, 2016 No. 03-03-06/1/43374).
How does modernization of a fixed asset affect the useful life and depreciation rate?
The useful life of a fixed asset can be increased within the maximum period of the corresponding depreciation group.
In general, the position of the regulatory authorities is that maintaining or increasing the useful life of a fixed asset after its reconstruction, modernization or technical re-equipment does not entail a change in the depreciation rate of this object.
Modernization costs are written off through depreciation using the rate that was established when the fixed asset was put into operation, until the original cost of the fixed asset is completely written off or until the object is retired from the depreciable property.
It is possible that even after the expiration of its useful life, the object in tax accounting will continue to be depreciated until the cost is completely written off.
The letter of the Ministry of Finance of Russia dated 08/04/2016 No. 03-03-06/1/45862 allows depreciation to be calculated at a new rate, calculated based on the new useful life, in a situation where the useful life of a fixed asset is increased after its reconstruction, modernization or technical re-equipment .
In judicial practice there is a different point of view. Since the cost of fixed assets is written off as expenses through depreciation during the period of use of this object for commercial purposes, this period is determined by the taxpayer independently. If, as a result of modernization of a fixed asset, the useful life has not changed, then the taxpayer takes into account the entire cost of such a fixed asset during the remaining useful life, that is, increasing the amount of its monthly depreciation (Resolution of the Arbitration Court of the Volga District dated January 22, 2016 No. F06-4506/ 2015).
What to do if after reconstruction the purpose of the object changes, in other words, the object began to belong to a different depreciation group?
The Tax Code of the Russian Federation does not provide for the transfer of objects to another depreciation group if their purpose has changed as a result of reconstruction, modernization, technical re-equipment, or for other similar reasons (letter of the Ministry of Finance of Russia dated September 26, 2012 No. 03-03-06/1/503).
But if, as a result of a change in the technical characteristics of the reconstructed or modernized object, the OKOF changes, then this circumstance may mean the creation of a new fixed asset. The initial cost of such a fixed asset is determined according to Article 257 of the Tax Code of the Russian Federation (letter of the Ministry of Finance of Russia dated July 10, 2015 No. 03-03-06/39775).
How to depreciate property purchased from the previous owner?
An organization acquiring used fixed assets has the right to determine the depreciation rate for this property taking into account the useful life reduced by the number of years (months) of operation of this property by the previous owners (clause 7 of Article 258 of the Tax Code of the Russian Federation).
If the period of use by the previous owner exceeded the useful life specified in the Classification, the organization - the new owner determines such a period taking into account the expected period of use, safety requirements and other factors. Let’s assume that if the property is expected to be used for more than a year, then in relation to such property the period cannot be less than 13 months (letter of the Ministry of Finance of Russia dated 02/09/2011 No. 03-03-06/2/29).
Please note that the norm of paragraph 7 of Article 258 of the Tax Code of the Russian Federation does not give the new owner the right to continue to charge depreciation with errors (Resolution of the AS SZO dated December 22, 2015 in case No. A56-49077/2014).
In addition, the taxpayer can determine the useful life of acquired property that was in operation, without taking into account the period of its use by the previous owner (letter of the Ministry of Finance of Russia dated August 11, 2017 No. 03-03-06/1/51573).
Currently, a law has been adopted that provides for an investment tax deduction for organizations. What is the idea of this mechanism?
In reducing the amount of income tax on expenses for the acquisition of fixed assets and on expenses for completion, additional equipment, reconstruction, modernization, technical re-equipment (new article 286.1 of the Tax Code of the Russian Federation).
The deduction is applicable to expenses in relation to objects belonging to depreciation groups 3–7.
The validity period of the provisions on investment tax deductions is limited by the Tax Code of the Russian Federation to 10 years - until January 1, 2028.
If an organization chooses this accounting procedure, it will become impossible to recognize expenses incurred in any other way: the use of depreciation, as well as a depreciation bonus, for such objects is prohibited.
In the event of the sale of property in respect of which an investment deduction was applied, after the expiration of its useful life, the income will be the entire amount due under the agreement. Accounting for expenses of the initial cost of such property is possible if the sale is made before the expiration of the useful life and subject to the restoration of the amount of tax not paid in connection with the application of the deduction, as well as the payment of penalties.
What is the deduction amount?
Potentially, the amount of the deduction can be 100% of the tax amount (90% of the expenses incurred reduce the amount of tax to the regional budget and 10% to the federal budget). But only in relation to the amount of tax to the federal budget, the Tax Code of the Russian Federation directly allows for its reduction to zero.
From the wording of the bill, it is unclear the procedure for calculating the maximum amount of deduction in terms of reducing the amount of tax to the budget of the constituent entities of the Russian Federation, the ratio of the amounts of tax accepted for reduction and the expenses incurred between the budgets of the constituent entities of the Russian Federation when moving fixed assets.
Despite the fact that, due to the requirements of the Tax Code of the Russian Federation, the deduction, if the organization has decided to use it, must apply to all fixed assets of 3-7 depreciation groups related to the organization and separate divisions located on the territory of the constituent entities of the Russian Federation that granted the right to use deduction.
Ambiguities are significantly increased due to the reasons for vesting a subject of the Russian Federation with the rights to make a decision on granting a deduction, determining its size, categories of taxpayers and objects of the corresponding fixed assets in respect of which the deduction is applied, establishing a minimum period for applying the deduction, restrictions on transferring the balance of the deduction to subsequent reporting (tax ) periods.
The proposed mechanism may be potentially of interest to profitable organizations (which will have a tax amount calculated at the basic rate of 20%) that acquire property with a useful life of less than 20 years, which does not imply its sale during the specified period and movement to a constituent entity of the Russian Federation, in for which no deduction is provided.
Considering the timing of the adoption of the necessary laws by the constituent entities of the Russian Federation, the use of the investment tax deduction in 2021 is unlikely, and may be premature.
How will the application of the investment tax deduction affect the administrative burden of the organization?
The organization will have to calculate the maximum deduction amount based on the amount of tax that would be payable and the estimated amount of tax calculated at a rate of 5% (unless a different amount is established by the subject of the Russian Federation), in the conditions if the deduction were not applied.
During a desk audit of the declaration, the tax authority will have the right to request explanations and documents regarding the application of the deduction (new clause 8.8 of Article 88 of the Tax Code of the Russian Federation). Transactions of an organization that applies the deduction with its related party will be recognized as controlled if the income from transactions for a calendar year exceeds the amount of 60 million rubles (subclause 9 of clause 2 of the Tax Code of the Russian Federation and clause 3 of Article 105.14 of the Tax Code of the Russian Federation).
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