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 books. The depreciation of assets and liabilities must be recorded in our company's books. account books and use this information to fill in the different forms that we are obliged to submit periodically to the tax authorities.
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, The aim is to amortise a debt by paying a bill month after month, to amortise a machine or, in other words, to use it to its maximum capacity in order to finish paying it off as soon as possible so that it starts to make a profit, etc.
On the other hand, in accounting jargon, we speak of tax depreciation. when we refer to recording those assets of the company which are losing their value with the passage of time, which are “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 attend to its customers, etc. I am sure you remember many examples of these goods that can be written off to recover part of their value: different machinery, company vehicles, computers, mobile devices, office furniture, work tools, etc.
As mentioned before, the different assets that a company has are depreciating with time, with use, with the emergence of new products on the market that make these assets obsolete, etc. Logically, this depreciation that a company's assets undergo affects its accounting. The tax authorities take into account this depreciation or loss of value of the company's assets and admit that are amortised or, in other words, that can be deducted in accounting.
Tax depreciation is governed by quadrants called depreciation tables or tables of straight-line depreciation rates.
These tables allow us to calculating tax deductions to which we are entitled depending on the type of company we have, our main activity, the type of asset to be depreciated, etc.
The tax depreciation tables The different elements are considered, the percentage of amortisation to be applied and the period of time over which we can amortise this investment.
Some examples:
We hope we have helped you to better understand what tax depreciation is and its usefulness for your company.
