Some companies confuse tax depreciation with book depreciation, a confusion that creates confusion that creates problems when correctly managing the books of accounts, when submitting the different tax forms to the tax authorities, etc. Today we are going to try to clear up this mistake in the best possible way by explaining in detail these two types of tax and accounting depreciation through several practical examples.
Let's start at the beginning, by explaining what the verb "amortise" means from three points of view: general, accounting and taxation.
From a general point of view, to depreciate an asset means register your expenditure monthly or annually in our company's accounting records. The depreciation of assets and the amortization of liabilities must be recorded in the account books from our company and use that information to complete the various forms that we are obliged to submit to the tax authorities periodically.
From the accounting or financial point of view, the verb amortise means recovering the money we have invested in our company. We can, for example, amortising a debt by paying a bill month after month, amortising a piece of machinery or, in other words, using it to its maximum capacity to finish paying it off as soon as possible and for it to start generating profits, etc.
On the other hand, In accounting jargon, we talk about tax depreciation. when we refer to recording those assets of the company which are losing their value as time goes by, which is going“depreciating”This happens with any asset in which a company has invested to start its business, to continue manufacturing the products it offers to the market, to market them, to serve its customers, etc. You will surely remember many examples of these goods what we can amortise to recover some of its value: the different machinery, company vehicles, computers, mobile devices, office furniture, work tools, etc.
As we said before, the different goods that a company has are depreciating over time, with use, with the emergence of new products on the market making those goods obsolete, etc. Logically, this depreciation that a company's assets suffer affects its accounting. The tax authorities take into account this depreciation or loss in value that the company's assets suffer and allow that are amortised or, in other words, that can be deducted in accounting.
Tax depreciation is regulated by quadrants called depreciation tables or Linear depreciation tables.
These tables allow us to calculating tax deductions to which we are entitled based on the type of company we have, our main activity, the type of asset to be depreciated, etc.
The Tax amortization tables They consider different elements, the depreciation percentage to apply, and the time period over which we can depreciate that investment.
Some examples:
We hope we have helped you to better understand tax depreciation and its usefulness for your company.
