Compensation for depreciation

From 2022, the approach to taxation of compensation payments for depreciation of an employee’s property used for business purposes has changed. Previously, the amounts of such payments were subject to income tax: an employer was recognized as a tax agent and was obliged to calculate, withhold and transfer the income tax amount to the budget.

This year, income in the form of compensation for depreciation of the property owned by an employee is not subject to income tax. In view of the new realities, payment of such compensations will be considered by the tax authorities for manipulations with the tax base.

To prevent tax risks, we recommend avoiding payments and transactions that are known to be economically and financially unprofitable for the company, for example:

– sale of the company’s property to an employee at a below-market price followed by payment of compensation for the use of such property;

– payment of unreasonably high compensation amount;

– payment of compensation for depreciation of the property that is actually used for personal purposes of an employee;

– “charge” of expenses for compensation and debt to an employee without the intention to pay it.

For tax matters, please contact the Head of Tax Consulting Department Yuriy Kardymon ykardymon@uhy-bc.by and the Head of Outsourcing Department Maria Zaskevich mzaskevich@uhy-bc.by

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