LETTER OF THE STATE TAX SERVICE OF UKRAINE

of January 23, 2013 No. 1126/6/23-50-0114

According to item 146.19 of Art. 146 of the Tax code of Ukraine (with changes and amendments, further - the Code) if the agreement of operational lease (leasing) or concession obliges or allows the lessee or the concessionary to perform repairs and/or improvements of object of operational lease (leasing) or concession, part of cost of such repairs and/or improvements in the amount exceeding carried on expenses according to paragraph to the second item 146.11 and item 146.12 of Art. 146 of the Code will be amortized by the lessee or the concessionary as separate object according to the procedure, established for group of fixed assets to which object of operational lease (leasing) or concession which is repaired and/or improves belongs.

At the same time the lessee does not consider book value of objects of operational lease / leasing on which they are considered on balance of the lessor.

In case of return by the lessee of object of operational leasing / lease to the lessor as a result of the end of action of the leasing/lease agreement, and also in case of destruction, stealing or destruction of object of operational leasing / lease, such lessee uses rules, certain items 146.16 of Art. 146 of the Code for replacement of fixed assets. At the same time the lessor does not change the cost of fixed assets which will be amortized, or the expenses on expense amount performed by the lessee for improvement of such object (item 146.20 of Art. 146 of the Code).

The depreciation of separate object stops, since the month following after month of removal from operation of such fixed asset object or its transfer to structure of non-productive irreversible tangible assets according to the decision of the taxpayer or court (item 146.15 of century to 146 Code).

Therefore, in case of return by the lessee of object of operational lease / leasing after the end of validity of leasing/lease the taxpayer - the lessee in the accounting period in which there are such circumstances increases expenses on the amount of cost of repair/improvement of object of lease which will be amortized, less cumulative depreciation amounts of such fixed asset object. At the same time the lessor does not change expenses on expense amount, performed by the lessee for improvement of such object.

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