Prepared by Pasquale Salvatore, Stefania Medda, Matteo Esposito, Sara De Vincenzi
Art. 60 co. from 7-bis to 7-quinquies of the Conversion Law (i.e. Law no. 126/2020) of “August Decree” (i.e. DL no. 104/2020) has introduced the possibility for OIC-adopter companies of not recording in Profit & Loss Statement in the Statutory Financial Statements related to the business year 2020, up to 100% of the depreciation of tangible and intangible fixed assets.
This optional measure might be extended also to the next financial years, after the issue of a Minister of Economy and Finance’s Decree.
In practice, the provision provides:
(i) that the “suspended” depreciation is recognised in the Profit & Loss Statement of the following financial year (for entities with a business year corresponding to the calendar year, at the Financial Statements at 31.12.2021) and, with the same method, the subsequent depreciation charges are deferred, extending the original depreciation plan by one year;
(ii) the recognise in the Statutory Financial Statements for 2020 of the assets for which is opted for the “suspension”, at a net book value equal to the resulting one from the Statutory Financial Statements for the previous business year;
(iii) the recognise in the Financial Statements of 2020 of an unavailable profit reserve equal to the “suspended” depreciation charges. If the profit for the year is lower than the deferred depreciation charges, the reserve must be supplemented through retained earnings or other available reserves. Any further deficiencies must be closed through specific allocation of the future profits;
(iv) the indication in the Explanatory Notes to the Financial Statements of the reasons that led to the application of the above-mentioned option, the quantification of the suspended charge, the corresponding creation of the unavailable reserve, indicating, in addition, the impact on the representation of the equity and financial position and profit or loss for the business year.
The aforementioned point (i) has been interpreted by the doctrine in two different way:
a) some authors have argued that the percentage of the depreciation charges suspended in 2020 should be recognised in the Financial Statements at the end of useful life of the related asset;
b) other authors argued that each year (with effect from the year in which the company opt for the suspension) a percentage of the depreciation charges, equal to that suspended in 2020, should be deferred to the following year.
The following example helps to understand the above-mentioned interpretations:
| Interpretation a) | |||||||
| Historical cost: | 5.000,00 | ||||||
| Depreciation rate: | 20% | ||||||
| Suspension year: | 2020 | ||||||
| % suspension: | 80% | ||||||
| Data | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
| Historical cost | 5.000 | 5.000 | 5.000 | 5.000 | 5.000 | 5.000 | 5.000 |
| Original civil depreciation | 500 | 1.000 | 1.000 | 1.000 | 1.000 | 500 | 0 |
| Civil depr. with suspension | 500 | 1.000 | 1.000 | 200 | 1.000 | 500 | 800 |
| Interpretation b) | |||||||
| Historical cost: | 5.000,00 | ||||||
| Depreciation rate: | 20% | ||||||
| Suspension year: | 2020 | ||||||
| % suspension: | 80% | ||||||
| Data | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
| Historical cost | 5.000 | 5.000 | 5.000 | 5.000 | 5.000 | 5.000 | 5.000 |
| Original civil depreciation | 500 | 1.000 | 1.000 | 1.000 | 1.000 | 500 | 0 |
| Civil depr. with suspension | 500 | 1.000 | 1.000 | 200 | 1.000 | 900 | 400 |
In addition, although the possibility to “suspend” the depreciation of assets from a civil point of view was granted and deferred to the following business year, from a fiscal point of view, the Legislator has provided, however, the possibility of deducting them both for the purpose of income determination, in accordance with the provisions of Articles 102, 102-bis and 103 of D.P.R. 917/1986 and for the purposes of determining the value of net production, in accordance with the provisions of Articles 5, 5-bis, 6 and 7 of Legislative Decree no. 446/1997.
The deduction of the “suspended” depreciation chargers will lead to a mismatch between the civil and the tax value of the assets, resulting in:
(i) the implementation of a decreasing change in the “REDDITI SC” and “IRAP” model relating to the tax period 2020;
(ii) the filling in of the RV Framework of the “REDDITI SC” model;
(iii) the recognition of deferred tax liabilities calculated on the “suspended” depreciation charges.
These deferred taxes will be issued at the end of the civil depreciation period of the asset, or at the time of its disposal (if earlier).
In the light of the above, it is pointed out that neither the Legislator nor the Financial Administration have provided any clarifications in relation to:
– the correct interpretation of the provision with reference to the deferral mechanism for depreciation charges, as set out in the numerical example depicted above;
– the fact that, in the absence of specific indications, the suspension of all or only part of all depreciation or only certain selected assets or categories of assets would appear to be permitted.
Official clarifications are required on the matters above.
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