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6.3. Depreciation and Amortization

Depreciation is permitted for all fixed assets necessary for the business. Depreciation allowances should be determined by reference to the usage accepted in each industry and are generally based on the straight-line method. Depreciation allowances booked in loss years may be carried forward and used in the first profitable year(s).

Instead of the straight-line method, taxpayers may apply either the accelerated or the declining-balance method.

The accelerated depreciation method may be used for fixed assets which (a) are exclusively used in industry, manufacturing, maintenance, hotels, telecommunications, and farming, and (b) have a useful life of more than 5 years. Under this method, the first year’s allowance is doubled and the useful life is correspondingly reduced by one year.

The declining-balance method may be used with respect to new equipment and tools on condition that their useful life is at least 3 years. Under this method, the depreciation allowance is determined by multiplying the straight-line rate by a coefficient depending on the useful life of the asset, as follows:

  • 1.5 if the normal useful life of the asset is 3 or 4 years;
  • 2 if the normal useful life of the asset is 4 or 6 years;
  • 2.5 if the normal useful of the asset exceeds 6 years.

Effective from 1 January 2019, assets acquired under a finance lease are to be depreciated over the estimated useful life of the asset, instead of over the duration of the lease contract, which was permissible previously.

Effective from 1 January 2019, estimated expenses on removal, dismantling and restoration, which are capitalized in the books, are not considered as additions for tax purposes. Actual expenses are included in the year in which they are incurred for tax purposes and depreciated over 5 years on a straight line basis.