Tax Depreciation of Fixed Assets

This functionality enables you to restrict the tax depreciation of fixed assets.

Multiple tax systems exist. Some are simple modifications of the regular Straight Line principle (referred to as Straight Line), and the others are based on complex calculations. While this update preserves the existing option that does not limit tax depreciation, it also provides two new options to set up limitation on tax depreciation.

The two new options are:

• Straight Line tax depreciation with parameter
• Table-based depreciation specifying the percentage year by year

These are added to support both simple and complex tax depreciation systems. You can now use tax accelerated depreciation, in addition to Straight Line depreciation. Additionally, this update now enables you to set up tax depreciation tables based on annual tax percentage. Then, you can use the tax depreciation tables in the Asset Group, where Maconomy derives the tax depreciation setup.

This is a requirement in some countries, including Italy, India, and the US. In Italy, the law specifies an upper percentage on the assets value, which are depreciable each year. However, for the first fiscal year, the upper limit is only half of the amount allowed in subsequent years. It is as if a company, with fiscal year from January 1 to December 31, purchased all of its assets on July 1. This is regardless of the actual purchase date in the calendar year.

In the US, the Modified Accelerated Cost Recovery System (MACRS) is the tax depreciation system. Under MACRS, half-year depreciation is the standard. Some additional complex calculations are subject to several parameters based on the type of asset. Additionally, the Class Life Asset Depreciation Range (CLADR) lookup tables reduced complex calculations. Thus, it provides an easy access to the depreciation rates.