NEW REGIME FOR THE TAX DEPRECIATION AND AMORTIZATION OF ASSETS
The procedure for computing the depreciation and amortization of assets was modified
In order to update the tax regime to comply with the International Financial Reporting Standards (“IFRS”), it was determined that depreciable and amortizable assets include the following: (i) property, plant and equipment (PP&E); (ii) investment properties and (iii) the intangible assets in the exploration and evaluation of non-renewable natural resources. Terrains, movable assets and transferable securities will continue as non-depreciable assets.
The depreciation methods are those established in the accounting technique, since a reference is made to the IFRS for this purpose.
The depreciation rate to be used annually will be established according to the accounting technique, but limits will be established by the Government. The maximum depreciation rates will range from 2.22% to 33%.
An accelerated depreciation will be allowed, increasing the depreciation rate by 25% if the depreciable asset is used daily for 16 hours and proportionally in higher fractions, provided that this can be proved. This treatment does not apply to real estate.
The depreciation basis does not include the VAT paid in the acquisition or nationalization of the asset, when it should have been treated as a discount or deduction in the income tax, in VAT or when other tax deduction was granted.
In relation with the useful life, it was established that this will be the period during which the asset is expected to grant future benefits to the taxpayer. Therefore, the depreciation rate will not necessarily match with the financial depreciation rate. In any case, the useful life chosen must be supported in technical studies, user guides or reports.
In relation with the amortization of intangibles, the deduction for amortization applies to intangible assets subject to demerit, which, according to the accounting technique, should be recognized as assets for their amortization. As a general rule, the depreciation method will be determined in accordance with the accounting technique, but in any case the annual aliquot cannot exceed 20% of the tax basis of the asset. In the event that the intangible is acquired under a contract, the amortization will be made using the straight line method for the duration of the contract, but in any case the annual rate cannot exceed 20% of the tax basis of the asset.
Intangibles acquired separately or as part of a business acquisition, will only be amortized if: (i) they have a defined useful life; (ii) can be reliably identified and measured in accordance with the accounting technique; and (iii) its acquisition generated at the level of the Colombian tax resident an income taxed in Colombia, or when the asset had been acquired from an independent third party from abroad.
It is important to take into consideration that intangible assets acquired from related parties, whether domestic or foreign, will not be amortized.
Finally, it was established that capital gains from goodwill will not be amortized.
