Nestor Nestor Diculescu Kingston Petersen has successfully represented Romanian electricity distributor ENEL E-Distributie Banat in a tax dispute regarding tax depreciation for transferred fixed assets.
According to NNDKP, the dispute concerned “the possibility of the taxpayer deducting the value of tax depreciation for tangible assets (electricity grid connectors) acquired from the company’s clients through transfer, for the calculation of corporate income tax. Initially, tax authorities rejected this possibility based on the way in which the company acquired the connectors (free of charge) and considering the existence of accounting depreciation rules different from the tax depreciation rules that were used.”
According to the firm, “this dispute shed light on significant tax law matters, including on the taxpayer’s right to opt for an accounting depreciation period different from the periods provided by the law for tax depreciation. Furthermore, the court also considered the effect that the different accounting and fiscal depreciation rules would have over time on the tax base for corporate tax from a fiscal perspective. The rationale for this, also confirmed by the court, relies on the different purposes of the two types of depreciation. The accounting depreciation aims to accurately reflect a company’s financial value and allow the exercise of professional judgment in determining the period over which the asset will bring economic benefits to the taxpayer. The purpose of tax depreciation is to ensure the recovery/fiscal admission of the acquisition cost based on the criteria provided by the fiscal law and, implicitly, the accurate determination of the tax base for corporate income tax, including when the fixed asset is donated to the company.”
NNDKP’s team included Partners Daniela Gramaticescu and Silviu Badescu and Senior Associate Alexandru Lacureanu.
