Depreciation should be computed using the straight-line method; any other method must be approved by the tax authorities.
The tax depreciation rates should respect the limits imposed by Presidential Decree no. 207/15, of 5 November 2015.
The table below summarises some examples of the depreciation tax rates.
|Type of asset
||Between 12.5% and 25%
|Light passenger vehicles
Depreciation that is non-deductible for CIT purposes, for exceeding the maximum depreciation rate, may be deducted in subsequent periods, provided the respective accounting adjustment is made.
An intensive operating regime is foreseen allowing accelerated depreciations. The depreciation rate can be increased by 25% in the case of production on two shifts and by 50% in the case of continuous production.
Goodwill is not deductible for CIT purposes.
Interest costs are deductible for CIT purposes, except the interest on shareholder loans or other shareholder funds.
Write-off of bad debts may only be deducted for CIT purposes to the extent they result from the execution, bankruptcy, or insolvency of the debtor and they are duly supported with public certificates.
The following provisions are accepted as tax deductible:
- Those related to contingencies and liabilities resulting from lawsuits for facts that would determine their inclusion as costs deductible for tax purposes.
- Those related to bad debts, when the risk of non-recovery is considered to be justified, and subject to certain tax limits.
- Those related to inventory depreciation within certain tax limits.
- Those respecting the limits and rules imposed by the Insurance Supervision Institute for insurance companies, as well as the Central Bank for Financial Institutions.
In relation to doubtful debts, the regime:
- Limits the provision’s deductibility to credits in which the risk of collection is considered duly justified. According to the tax law, the recovery risk is justified whenever:
- The debtor is in insolvency, recovery proceedings, and enforcement procedure.
- The credit was claimed in court.
- The credit is overdue for more than six months and there is proof of collection diligences.
- Excludes from tax deductibility the provisions of credits covered by insurance, over shareholders and subsidiaries (at least 10% share), and over the state and public companies.
In relation to the losses incurred with inventories, the regime:
- Foresees different tax limits, depending on the sector of activity.
- Imposes that the provision is calculated by the difference between the stock’s market price and its acquisition cost.
- Foresees a special regime for taxpayers engaged in editorial activities.
Donations are only deductible for CIT purposes if fully compliant with the Patronage Law. The requirements imposed by this law are very restrictive.
Fines and penalties
Fines and penalties are not accepted for tax purposes.
Indirect taxes are deductible for CIT purposes. Direct taxes are non-deductible, namely the CIT itself, IRT, IAC, IPU, or taxes paid on behalf of third parties (e.g. social security contribution and IRT supported on behalf of the employees).
Unduly documented expenses, non-documented expenses, and confidential expenses are subject to autonomous taxation at rates ranging between 2% and 50%. The donations granted outside the scope of Patronage Law are also subject to autonomous taxation at rate of 15%. The amount of autonomous taxation should be added to the taxable income.
Net operating losses
Tax losses can be carried forward for three years.
Carryback of losses is not allowed.
Payments to foreign affiliates
Payments to foreign affiliates are accepted for tax purposes, although the arm’s-length principle should be complied with.