The military commissariat confiscated a bus from a company for army needs (there are an order and certificate of transfer and acceptance). Whether to charge depreciation in the accounting and tax records? The accounting considerations have been already studied in part 1 of the article. Let’s fix on the taxes.
Tax accounting
It should be guided by the provisions of the Tax Code of Ukraine of 02.12.2010, № 2755-VI (hereinafter – TCU) for fixed assets accounting.
According to the paragraphs 145.1.2 p.145.1 of Art.145 of TCU the depreciation is charged during subject’s useful life (operation), which is approved by the administrative order recognizing the subject as asset (including in the asset list), but not less than that specified in p.145.1, and is suspended for the period of its decommission (for reconstruction, modernization, further construction, retrofit, deactivation etc.) on the document basis, which testify to decommission of such fixed assets.)
The expenses for purchasing/unassisted making and repair as well as reconstruction, modernization or other improvement of nonproductive assets are not subject to the depreciation and are held at the expense of proper financing sources, it is determined by the paragraph 144.3 of Art.144 of TCU.
The term “nonproductive assets” means noncurrent fixed assets, which are not used in the taxpayer’s economic activities.
In its turn, the economic activity – the person activity, which is connected with the production (manufacturing) and/or with the realization of goods, execution of work, service supply, and is focused on income receiving and is carried out by this person all alone and/or through his separate subdivisions as well as through any other person that acts on favor of the first person, in particular under commission contracts, by attorney and agency agreements (pp.14.1.36 p.14.1 Art. 14 of TCU).
Therefore, the other reasons to cease depreciation charging are provided for by the provisions of the TCU.
In the case under consideration, the bus is used not by the company itself but by the Armed Forces, viz. there is no decommission of the subject. The bus continues to be used not in the company economic activity. For this reason the company should transfer this subject to the nonproductive assets and not to depreciate in the tax accounting.
We would like to call attention to the fact that when the returning of the fixed asset to the company, with its following use in the economic activity, the depreciated cost would be the subject to the tax accounting of depreciation, which is determined at the commissioning date after the return to the company, rather than the balance value at the date of transfer to the Armed Forces of Ukraine. That is, the balance value at the date of transfer to the Armed Forces should be reduced by the estimated amount of depreciation, which would be charged during the usage of the subject by the Armed Forces.
