The State Tax Service clarified the procedure for calculating tax depreciation

According to subparagraph 14.1.3 of paragraph 14.1 of Article 14 of the Tax Code of Ukraine (hereinafter – TCU), depreciation is the systematic allocation of the depreciable cost of fixed assets, other non-current and intangible assets over their useful life.

Article 138 of the TCU defines the differences that arise when calculating depreciation.

In particular, paragraphs 138.1 and 138.2 provide that:

• the financial result before taxation increases by the amount of depreciation of fixed assets and/or intangible assets accrued in accordance with national accounting standards;
• it decreases by the amount of tax depreciation calculated under paragraph 138.3.

According to subparagraph 138.3.1 of paragraph 138.3 of Article 138 of the TCU, tax depreciation is calculated in accordance with national accounting standards or international financial reporting standards, taking into account restrictions and without considering revaluations. Depreciation is not accrued for the conservation period — a set of long-term storage measures (up to 3 years) provided for by Resolution of the Cabinet of Ministers of Ukraine No. 1183 dated 28.10.1997.

Depreciation does not apply to (subparagraph 138.3.2 of paragraph 138.3 of Article 138 of the TCU):

• goodwill;
• expenses for the acquisition or self-construction of non-production fixed assets, non-production intangible assets;
• expenses for the repair, reconstruction, modernization, or other improvements of non-production fixed assets and non-production intangible assets.

The terms “non-production fixed assets” and “non-production intangible assets” mean, respectively, fixed assets and intangible assets not intended for use in the taxpayer’s business activities.

Subparagraph 14.1.36 of paragraph 14.1 of Article 14 of the TCU defines business activity as an activity of a person related to the production and/or sale of goods, performance of works, provision of services, aimed at obtaining income, and carried out independently and/or through separate divisions, as well as through any other person acting in favor of the first person, in particular under commission, mandate, and agency agreements.

If assets are intended for business activity and depreciation is not suspended in accounting during temporary downtime, then they are also depreciated for tax purposes. This also applies to assets located in temporarily occupied territories or combat zones, provided that depreciation continues to be accrued in accounting.

The list of such territories is defined by Order of the Ministry for Communities and Territories Development of Ukraine No. 376 dated 28.02.2025 (effective from 20.03.2025), which also invalidated the previous Order of the Ministry for Reintegration of Temporarily Occupied Territories of Ukraine No. 309 dated 22.12.2022. The start and end dates of active hostilities or occupation are taken from this updated List.

Thus, tax depreciation is possible during downtime or when assets are located in combat zones if they are used (or intended for use) in business activity and depreciation has not been suspended in accounting.