Article 31, item 5 of the Income Tax Law (LIR) states the criteria for accepting the depreciation applied on fixed assets of First Category Income Tax (IRPC) taxpayers who pay their taxes based on actual income demonstrated by full accounting.

The charge to results for this concept is only accepted when it has been calculated with the “linear” method, applied over the historical cost of the readjusted good according to the variation of the Consumer Price Index (IPC), without lowering any concept for residual value. Years of useful life defined by the Internal Revenue Service (SII) in diverse instructions will also be considered.

The same article states that taxpayers may increase the amount of annual depreciation by lowering to one-third the years of useful life that the SII has fixed for all goods, allowing to reflect a greater depreciation expense that will lower the taxable profitability. However, this “accelerated depreciation” can only be applied to new goods or imported goods which regular useful life defined by the SII is not less than 3 years.

Germán Pinto Perry