ACCOUNTING AND TAXATION OF LEASING CONTRACTS

TAXATION OF LEASING CONTRACTS

Maintenance and repair of own fixed assets (lessor – in the case of operational leasing, lessee – in the case of financial leasing)

According to item 20 of GD no. 704/2019, the attribution of subsequent expenses/costs related to the repair or development to current expenses or to subsequent costs to be capitalized is carried out in accordance with NAS/IFRS. Accordingly, the deductibility of these expenses for tax purposes depends on the entity’s decision on how to classify repairs as current costs/expenses of the period or capitalization of the cost of fixed assets in accordance with the provisions of NAS/IFRS.

Subsequent costs/expenses for repairs, which, according to the provisions of NAS/IFRS, should be reflected as current costs/expenses for tax purposes do not require adjustments and are allowed for deduction if they comply with paragraph (1) of art. 24 of the CF.

A separate rule is provided for the expenses related to the repair of the own means of transport used for the provision of road transport services for people in taxi mode, the deduction in the amount of 100% being allowed.

Regarding the costs of maintenance, servicing and technical assistance, taking into account the provisions of paragraph 23 of GD no 704/2019, they are not considered expenses for repair, being attributed to current expenses, with the recognition of the deduction in accordance with art.24 (1) of CF no 1163/1997.

If the subsequent expenses/costs that, according to the provisions of the NAS/IFRS, must be capitalized (in accounts 121, 131, 151), for tax purposes, they are also capitalized by increasing the initial cost by the sum of the subsequent expenses/costs incurred.

That is, for tax purposes, the same approach applies as in accounting with regard to the procedure for capitalizing the cost of repairing fixed assets.

The amount of capitalized expenses (subsequent costs) for repairs/development influences the increase in depreciation calculated for tax purposes starting with the month following the month in which the capitalization took place.

At the same time, we note that, both in financial accounting and for tax purposes, for the period of repair works, the depreciation of fixed assets is not interrupted.