How to determine the useful life of a building?

Standards for taxation of income with the purpose of income tax are regulated by Article 258 of the Tax Law of Russia. Accounting and tax calculation methods have similar features, but there are moments of significant difference. We will tell about them in the article in more detail.

The general concept of SPI

What is it? Not everyone can figure it out. The useful life of buildings is understood as the period in which an intangible asset or fixed asset can serve for the purposes pursued by taxpayers in their activities. It is calculated by the entrepreneur independently, and the date on which the property is put into operation is necessarily taken into account.

The tax system is characterized by its definition only by temporary indicators. Accounting also provides for the establishment of the useful life of a building depending on the quantity of products that have been produced during this time. What does depreciation have to do with it?

Depreciation Objects

Depreciation of a building and the useful life of the same property are related concepts.

The first is the transfer of the value of an object to products created during its use. This also includes work and services provided. Depreciation allowances help create a source for easy reproduction. Thus, in fact, it is possible to increase the cost of the final product by 5-7 percent, which will later be used to repair or replace equipment, if necessary. In other words, the depreciation of the building allows you to transfer the money spent on the acquisition of funds related to the category of basic to services and goods, including them in the final cost. Depreciation is charged on the following objects:

1. Fixed assets for which consumer properties do not change over time. This property includes land, museum objects, nature management objects, etc. The useful life of fixed assets (buildings and structures) is determined in accordance with the depreciation group.
2. Housing stock. But only in cases where it is not used with the intention of earning income.
3. Road facilities and external beautification.
4. Perennial plantings that have not reached the operational age.
5. Cattle.
6. Used for mobilization and mobilization training. These include objects that were mothballed and closed for the production of products and managerial needs, as well as those put into temporary paid use.

The essence of depreciation

The production process of an item, work or service requires the organization to spend on the purchase of materials, energy, pay wages to workers, etc. These costs determine the cost of the final product. The useful life of an industrial building depends on the depreciation group. We will talk about this later.

However, for the production of certain products, the building of a workshop and administration is necessary, the first directly depending on the type of products that are produced (although in some cases it is not necessary). In addition, special equipment, a fence around the plant, and vehicles may be required. The useful life of a non-residential building, as mentioned, depends on the depreciation group.

It should be borne in mind that materials are purchased and used for production needs within a relatively short period of time (up to 12 months), while the building and machines used in the manufacture of products will remain unchanged for many years.

The costs of acquiring funds called basic are sometimes more expensive than the materials themselves, however, they tend to wear out, buildings can crumble and grow old, machines generate a resource and are sent to scrap.An object can be demolished or overhauled after the end of its useful life.

To purchase new equipment will need cash. For this reason, organizations and include in the cost of production premiums that are paid by the buyer.

Depreciation is due to the need to classify property values ​​as expenses and keep them accounted for. In the case of particularly expensive fixed assets, and the useful life of the building is long, depreciation is needed to gradually write off their value. This makes it possible to reduce costs. There are a number of features that should be considered when calculating depreciation in order to avoid errors and not to be in the attention of controlling organizations.

How to determine the useful life of a non-residential building? The concept of depreciation group will help to answer this question.

Ten depreciation categories

What does all this mean?

Tax legislation distinguishes 10 depreciation categories. The useful life of the building from the depreciation group is directly dependent. Thus, the main task in the calculation will be the assignment of an object to a specific group. Only after that it becomes possible to establish the period of useful use. After all, the depreciation of a building and the useful life of the same property are interdependent concepts.

About depreciation groups more

According to the classification given in the Tax Code, the following depreciation groups are distinguished:

• The first group. It includes all short-lived property, the use of which is from one to two years. The minimum period of use will be 13 months, and the maximum not more than 24 months.
• The second group consists of property, the useful life of which is up to three years.

Both the first and second groups apply depreciation premiums in the amount of not more than 10 percent.

• The third group includes fixed assets with a useful life of not more than five years.

The third and seventh depreciation premiums are calculated in the amount of up to 30 percent.

For all three first groups of fixed assets, an increased depreciation coefficient for the leased asset is not applied.

Starting from 2018, property included in the third depreciation group will be subject to property tax unless the subject of the Russian Federation adopts by this time a special law on the application of benefits in the territory of a particular region.

• The fourth group includes property, the useful life of which is up to seven years. This group includes transmission devices and structures, buildings, equipment and machinery, inventory, plantings, vehicles and livestock. This depreciation group is subject to property tax as well as the previous one.
• Fifth group. Includes fixed assets with a useful life of up to 10 years. This group includes transmission devices and structures, equipment and machinery, buildings, inventory, vehicles, as well as property that was not included in other groups.
• The sixth group includes fixed assets, the period of use of which is up to 15 years. This group includes dwellings, equipment and machinery, transmission devices and structures, transport, plantings and various equipment. The tax rule for this group applies the same as in the previous three groups.
• The seventh group is property with a useful life of up to 20 years. The group includes buildings, machinery, transport, equipment, transmission devices and structures, perennial plantings and other fixed assets.
• The eighth group includes property with a life of up to 25 years. This type of fixed assets includes buildings, transmission devices and structures, equipment and vehicles.

For groups 8 to 10, a depreciation premium in the amount of not more than 10 percent begins to act again. Also, in the latest depreciation groups, only the linear method of calculating the useful life is used.

• The ninth group includes fixed assets with a useful life of up to thirty years.

This group includes buildings, transmission devices and structures, equipment and machinery, vehicles, etc. The depreciation premium also amounts to 10 percent.

• Tenth group. There are no restrictions on the maximum useful lives of the building and other objects of this group. The composition of the property is the same as in previous cases. The useful life of buildings of group 10 is more than 30 years.

Correct depreciation on buildings

It is generally accepted that the ratio of the value of the building to the accumulated depreciation is the degree of its depreciation, but practice shows that in reality this is far from always the case. The value of depreciation payments is rather a mathematical and normative indicator, where there is some dependence on the useful life of buildings and structures. These deductions for the building will comply with the legislative standards only if the following parameters are correctly calculated:

1. The ultimate cost of funds related to the core. It consists of the total cost of the acquisition and construction of buildings and all associated operations (increases with revaluation or completion).
2. Useful life of the depreciation asset.
3. Depreciation on the building, which was accrued prior to the transfer to the current owner.
4. The method of calculating depreciation. Which, in turn, depends on the taxation system used and the legal form of organization.

There are also additional parameters that affect depreciation charges depending on the useful lives of buildings and structures. These include:

1. SPI increased by modernization and reconstruction. The additional value of which the company calculates independently, depending on the costs incurred. The useful life of a used building, on the contrary, can be reduced by the current owner.
2. SPI is increasing due to overhaul and conservation from three months. No depreciation will be charged for this period.

In order to ensure that the depreciation amounts do not raise questions from the regulatory authorities, all additional information from the previous paragraphs should be entered in the building inventory card. When asked about the useful life of a brick building, the answer will be given by the classification of depreciation groups.

Period setting

Depreciation on a building is accrued using an indicator such as the standard useful life.

Why the following documents are taken into account:

1. Government Decision No. 1, adopted in 2002. Used for buildings that are in depreciation groups from 4th to 9th. Each of them includes buildings taking into account their structural characteristics. Thus, the useful life of a building is determined in the range indicated for each depreciation group.
2. Resolution of the Council of Ministers of the Soviet Union of 1990. It regulates depreciation for the 10th depreciation group. The value of the useful life in years is calculated by dividing the number 100 by the depreciation rate of the building specified in the Decree.

The coefficients of the Soviet Decree can only be used in the amount of 3.3 to 0.4 percent, since this corresponds to the 10th depreciation group, which assumes a period of useful use of the building from thirty years and four months. For all other cases, the first document should be used.

Often, companies automate accounting, which can lead to reduced employee attention and errors. This may be a typo when entering residuals in the program or incompetence of the entered data. Therefore, it is necessary to carefully check the established periods of useful use and to adjust incorrectly determined depreciation indicators. It is desirable that it is logical to do this before the controlling organization detects the error.

The question of how to determine the useful life of a building, with the help of which tools and coefficients, can be answered based on the materials already considered.

Depreciation Methods

The depreciation of a building is fairly easily calculated through accounting programs. For this, it is enough to electronically fill in the card of the fixed asset, making it all the requested data. Further, a special program will do the calculation on its own.

However, in order to avoid mistakes, one should not only have an idea of ​​how depreciation is calculated without using specialized programs, but also have a good understanding of the entered parameters of the periods of useful use of buildings.

What does the STS offer?

Taxation involves four methods of calculating depreciation payments on buildings that are available to individuals and businesses. At the same time, the main taxation system is characterized by only two methods prescribed by the Russian Tax Code. These include:

1. Linear. The simplest and most common way to calculate depreciation on a building. The depreciation amount is uniform every month and is calculated by multiplying the depreciation rate in percent by the value of the object. The norm can be determined by dividing 100 by the useful life of the building per month. This method is used by enterprises making tax deductions for buildings from 8, 9 and 10 depreciation groups.
2. Non-linear. It is considered the most profitable, since the calculation confirms the potential for making large amounts. In accounting reports, this method is rarely used.

Depreciation is calculated starting from the next month after the building is registered, regardless of when it was put into operation.

Depreciation Budget

Enterprises that receive financing from the public sector, since 2010, by order of the Ministry of Finance, can not choose such depreciation indicators as the useful life and the accrual method. For them, the following options for transferring depreciation payments are provided:

1. If the value of objects is less than forty thousand rubles, then depreciation is paid in full. This applies to the registration of real estate buildings and the introduction of movable objects.
2. If the value of objects is more than this amount, a linear calculation method is used, as in previous cases.

When calculating the useful life of a property, budgetary organizations are obliged to choose the longest useful life of the building from those provided by the group.

Thus, it turns out that in the field of budgetary provision, depreciation rules are more stringent than in commercial ones. However, the responsibility of "state employees" is incomparably greater.