Edit

Fixed assets accounting for tax purposes

  • Article

This article provides information about the tax depreciation functionality for Latvia, including the tax depreciation setup and calculation and printing the tax depreciation report.

Note

Tax depreciation works with the value models. The value model and depreciation book have been merged into a single concept that is called a book. For more information, see Fixed asset value model and depreciation book merge.

Set up a depreciation profile

When you set up a depreciation profile, consider the following.

  • Depreciation year: Select the type of year that you use to calculate the depreciation. The depreciation year and the period frequency are related. Therefore, the options Period frequency field depend on the Depreciation year field value.
  • Period frequency: Select the frequency of ledger accruals during the calendar year or fiscal year. The options that appear in this field vary, depending on the depreciation year that you selected. If you selected Calendar as the depreciation year, the options are Yearly, Monthly, Quarterly, Half-yearly.
  • Full depreciation: Select this option to fully depreciate the fixed asset when the service life that remains is 0 (zero).

Set up books

Use the Books page to define a tax category. Books are also referred to as tax categories. To create a book, select the depreciation profile that has Reducing balance selected in the Method field in the Depreciation profiles page. The Books page for legal entities in Latvia contain the following fields:

  • Posting layer - Select Tax in this field.
  • Summarize for category - Select this option if tax depreciation should be summarized and calculated for all fixed assets that have the same book selected in the Category field.
  • Tax coefficients - You can set up tax coefficients for each coefficient to adjust the acquisition price for the fiscal year.

For more information about setting up books, see Set up depreciation books (May 2016).

Set up tax depreciation calculation

To set up tax depreciation calculation, on the Fixed assets page, select a fixed asset. Then, on the General FastTab, select a Book in the Category field. A fixed asset should only have one book associated in the current posting layer.

Note

This field displays the books record with a posting layer value equal to Tax only.

Calculate tax depreciation

To calculate fixed asset tax depreciation, on the Tax depreciation page, create a New tax period to use for reporting.

Field name Description
Start date Select the date from which the period is valid.
End date Select the date up to which the period is valid.
Period status Select the period status (Open or Closed). If the status is Closed, Categories on the Category details FastTab cannot be added or deleted.

On the Category details FastTab, select the book in the Category field that you want to calculate tax depreciation for. Click Calculate to calculate tax depreciation. Tax depreciation calculates for either individual fixed assets or is based on summary information from all fixed assets that are assigned to the same fixed asset tax category. The calculation is based on the tax coefficient from the selected book, and accounting data on the books of fixed assets associated with the book selected in the Category field.

Calculation formulas
Adjusted Value = Starting Balance + Value adjustments - Disposal + Acquisition price * Acquisition Coefficient
Tax Depreciation amount = Adjusted Value * Base Depreciation *2 /100 * number of months in period / 12
End Balance = Adjusted Value – Tax Depreciation amount
Starting Balance (current depreciation period) = End Balance (previous depreciation calculation period)

To view the tax depreciation details, click Tax depreciation details to open the Tax depreciation details page.

The Tax depreciation report provides Latvian users with tax reporting that is relevant to fixed assets in a company. To print the report, go to the Tax depreciation calculation page, select a specific record to summarize at the Category level. Click Tax depreciation report for categories that are not summarized using the Tax depreciation report.