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Amortization of intangible assets valued at less than 500 manats
Amortization of intangible assets valued at less than 500 manats
The topic is commented on by tax expert Javid Velizade. According to the legislation, amortization is the regular reduction in the value of long-term assets over their useful life. In simple terms, amortization means depreciation due to wear and tear.
Assets are classified into two groups by their nature: tangible assets and intangible assets.
According to Article 13.2.17 of the Tax Code, fixed assets refer to tangible assets with a useful life of more than one year and a value exceeding 500 manats, which must be amortized in accordance with Article 114 of this Code.
Article 13.2.9 of the Tax Code states that intangible assets refer to intellectual property, including trademarks, other industrial property objects, as well as other similar rights recognized as the property of the taxpayer in accordance with the relevant legislation.
Based on these provisions, intangible assets are not considered fixed assets. The Tax Code also does not contain any provision stating that “only fixed assets are subject to amortization.” Therefore, intangible assets valued at less than 500 manats must be recorded and amortized.
According to Article 114.3.6 of the Tax Code, intangible assets are amortized as follows:
up to 10% for assets with an indefinite useful life,
proportionally to the useful life in years for assets with a definite useful life.
Example: An enterprise purchases an intangible asset for 450 manats with a useful life of 5 years. Accordingly, an annual amortization amount of 90 manats will be calculated and considered as an expense deductible from income:
450 ÷ 5 = 90 manats.
The topic is commented on by tax expert Javid Velizade. According to the legislation, amortization is the regular reduction in the value of long-term assets over their useful life. In simple terms, amortization means depreciation due to wear and tear.
Assets are classified into two groups by their nature: tangible assets and intangible assets.
According to Article 13.2.17 of the Tax Code, fixed assets refer to tangible assets with a useful life of more than one year and a value exceeding 500 manats, which must be amortized in accordance with Article 114 of this Code.
Article 13.2.9 of the Tax Code states that intangible assets refer to intellectual property, including trademarks, other industrial property objects, as well as other similar rights recognized as the property of the taxpayer in accordance with the relevant legislation.
Based on these provisions, intangible assets are not considered fixed assets. The Tax Code also does not contain any provision stating that “only fixed assets are subject to amortization.” Therefore, intangible assets valued at less than 500 manats must be recorded and amortized.
According to Article 114.3.6 of the Tax Code, intangible assets are amortized as follows:
up to 10% for assets with an indefinite useful life,
proportionally to the useful life in years for assets with a definite useful life.
Example: An enterprise purchases an intangible asset for 450 manats with a useful life of 5 years. Accordingly, an annual amortization amount of 90 manats will be calculated and considered as an expense deductible from income:
450 ÷ 5 = 90 manats.