Suspension of amortisation and depreciation: extension to 2021 financial statements

The August Decree (Decree-Law No. 104/2020), with respect to the financial year in progress as of 15 August 2020, introduced, for entities that do not adopt international accounting standards, the possibility of suspending up to 100 per cent of the annual amortisation and depreciation cost of tangible and intangible assets, thus giving the possibility of maintaining the book value of the assets as it resulted from the last approved financial statements. 

The relative amount of the cost that had not been depreciated had to be charged to the profit and loss of the following financial year (i.e. 2021 for entities with a financial year coinciding with the calendar year) and the subsequent amount had to be deferred using the same criterion, introducing a one year “postponement” in the depreciation plan. 

Now, with the approval of the 2022 National Financial Law, in force since 1 January, a one year extension has been introduced that makes possible to apply for the suspension, as provided by the August Decree for the 2020, also for the 2021 financial statements. 

Consequently, also in the 2021 it will be possible to suspend the depreciation and amortisation up to 100 per cent, which will then be charged to the profit and loss of the following year. 

In addition, it should be noted that, as with the suspension in the 2020 financial statements, it is compulsory to accrue the profits equal to the suspended cost amount to the unavailable reserve in Equity. 

In the event of a loss or a lower amount of profits, the reserve shall be increased by using profit reserves or other available Equity reserves or, if not available, using the profits of future years.

However, the 2022 National Financial Law also introduced a limit to the entities that may choose for the suspension in the 2021 financial statements. 

In particular, the extension introduced concerns only those entities that, for the 2020 financial year, have suspended 100 per cent of the annual amortisation and depreciation. 

Therefore, the new regulation excludes both entities that did not choose for the suspension in the 2020 budget and entities that benefited from the “partial” suspension in 2020 (i.e. a suspension of less than 100 per cent of the annual cost).

Finally, from a tax point of view (both for IRES and IRAP purposes), it should be noted that the option to suspend the depreciation cost does not affect the possibility for taxpayers to deduct the cost (including the suspended part) even without the accrual of the profit and loss account of the year.