Article 259. Methods and Procedure for Calculating the Sums of Depreciation

1. For the purposes of the present Chapter, the taxpayer shall calculate the depreciation using one of the following methods, while taking into account the specifics envisaged by this Chapter:

1) the linear method;

2) the non-linear method.

2. The sum of depreciation for the purposes of taxation shall be defined by taxpayers every month, in accordance with the procedure established by the present Article. The depreciation shall be calculated separately for every object of the depreciated property.

Depreciation with regard to an object of depreciable property shall be accrued beginning from the first day of the month next following the month when this object was put into operation.

Charging depreciation with regard to an object of depreciable property shall be terminated beginning from the first day of the month next following the month when the cost of such object was completely written off or when this object was excluded from the composition of the depreciable property of a taxpayer for any reasons.

3. The taxpayer shall apply the linear method for the calculation of the depreciated property towards the buildings, structures and transmission appliances, included into the eighth to tenth depreciation groups, regardless of the deadline for putting these objects into operation.

The taxpayer shall have the right to apply to the rest of the fixed assets any one of the methods presented in Item 1 of this Article.

The method of calculating the depreciation selected by a taxpayer may not be changed within the entire period of calculating depreciation for an object of depreciable property.

The calculation of the depreciation with respect to an object of the depreciated property shall be effected in accordance with the depreciation norm established for the given object proceeding from its term of beneficial use.

4. When applying the linear method, the sum of the depreciation, calculated with respect to the object of the depreciated property for one month, shall be defined as the product of multiplying its original (replacement) cost by the depreciation norm established for the given object.

When using the linear method, the depreciation norm for every object of the depreciated property shall be defined by the formula:

K = [1/n] X 100%,

where K is the depreciation norm in percentages of the original (replacement) cost of the object of the depreciated property, and

n is the term of beneficial use of the given object of the depreciated property, expressed in months.

5. When using the non-linear method, the sum of the depreciation, calculated for one month with respect to the object of the depreciated property, shall be defined as the product of the residual cost of the object of the depreciated property, multiplied by the depreciation norm fixed for the given object.

When using the non-linear method, the depreciation norm of the object of the depreciated property shall be defined by the formula:

K = [2/n] X 100%,

where K is the depreciation norm in percentages of the residual cost applied towards the given object of the depreciated property, and

n is the term of beneficial use of the given object of the depreciated property, expressed in months.

Beginning with the month next to the month in which the residual cost of the object of the depreciated property reaches 20 per cent of the original (replacement) cost of this object, the depreciation for this object shall be calculated in the following order:

1) the residual cost of the object of the depreciated property shall be fixed for the purposes of calculating the depreciation as its basic cost for further calculations;

2) the sum of the depreciation being calculated for one month with respect to the given object of the depreciated property shall be defined by dividing the basic cost of the given object by the number of months left until the expiry of the term of beneficial use of the given object.

6. If in the course of a certain calendar month the organisation was instituted, liquidated, reorganised or transformed in any other way, so that in conformity with Article 55 of the present Code the tax period for it begins or ends before the end of the calendar month, the depreciation shall be calculated with account taken of the following specifics:

1) no depreciation shall be calculated by the liquidated organisation from the first day of the month in which the liquidation is completed, and by the reorganised organisation - from the first day of the month in which the reorganisation is completed in the established order;

2) the depreciation shall be calculated by the instituted organisation, emerging as a result of the reorganisation, as from the first day of the month next to the month in which its state registration was effected.

The provisions of this Item shall not be spread to organisationswhich change their legal organisational form.

7. With respect to the depreciated fixed assets used for work under the conditions of an aggressive environment and (or) of a rigid shift schedule, the taxpayer shall have the right to apply to the basic depreciation norm a special coefficient, which shall not be higher than 2. For the depreciated fixed assets which are an object of a contract of financial rent (of a contract of leasing), the taxpayer, who has a fixed asset which shall be accounted under the terms and conditions of a contract of financial rent (of a contract of leasing), shall have the right to apply to the basic depreciation norm the special coefficient, which shall not be higher than 3. The given provisions shall not be spread to the fixed assets referred to the first, second and third depreciation groups if the depreciation for the given fixed assets is calculated using the non-linear method.

The taxpayers who use the depreciated fixed assets for the performance of work under the conditions of an agressive environment and (or) of a rigid shift schedule, shall have the right to apply the special coefficient mentioned in this Chapter only when computing the depreciation with respect to the indicated fixed assets. For the purposes of this Chapter, seen as an aggressive environment shall be the aggregate of the natural and (or) artificial factors, whose impact is responsible for a higher wear and tear (ageing) of the fixed assets in the course of their operation). To the work in an aggressive environment shall also be equated the fixed assets being in direct contact with the explosion or fire-hazardous, toxic or other kind of aggressive technological environment, which may serve as a cause (source) of an emergency situation.

Taxpayers which are agricultural organizations of industrial type (battery farms, cattle-breeding complex farms, beast farms, hothouse complex farms) shall be entitled in respect of their own fixed assets to apply to the basic depreciation norm, chosen independently subject to the provisions of this Chapter, a special coefficient of 2 at most.

8. The taxpayers which have handed over (received) the fixed assets that are the object of a contract of leasing concluded before the present Chapter was put into operation shall have the right to calculate the depreciation for this property using the methods and the norms existing at the moment of handing over (receiving) the property, and also applying a special coefficient of not higher than 3.

9. For passenger cars and passenger minibuses with the original cost, respectively, of over 300,000 roubles and 400,000 roubles, the basic depreciation norm shall be applied with the special coefficient of 0.5.

The organisations which have received (transferred) the above passenger cars and passenger minibuses into leasing shall include this property in the composition of the corresponding depreciation group and shall apply the basic depreciation norm (subject to the coefficient applied by a taxpayer for such property) with a special coefficient of 0.5.

10. The calculation of the depreciation according to the depreciation norms which are lower than those established by the present Chapter shall be admissible by the decision of the head of the taxpaying organisation confirmed in the accounting policy for the purposes of taxation. The reduced depreciation norms may be applied only as from the start of the tax period and throughout the entire tax period.

11. In the sale of the depreciated property by taxpayers who have been applying the reduced depreciation norms, the tax base shall not be recalculated by the sum of the undercalculated depreciation against the norms envisaged by the present Article for the purposes of taxation.

12. An organisation acquiring the used objects of the fixed assets shall have the right to determine the depreciation norm for this property, taking into account the term of its beneficial use, reduced by the number of years (months) over which the given property was operated by its previous owners.

If the term of actual use of the given fixed asset by previous owners is equal to or exceeds the term of beneficial use thereof determined on the basis of the classification of fixed assets endorsed by the Government of the Russian Federation in compliance with this Chapter, the taxpayer shall be entitled to determine independently the term of beneficial use of this fixed asset subject to the accident prevention requirements and other factors.

Article 260. Outlays on the Repairs of Fixed Assets

1. The outlays on the repairs of the fixed assets, made by a tax payer, shall be considered as other outlays and shall be recognized for taxation purposes in the accounting (tax) period, in which they were effected, in the amount of actual expenses.

2. The provisions of the present Article shall also apply towards the outlays of the lessee of the depreciated fixed assets, if the contract (agreement) concluded between the lease-holder and the lease-giver does not stipulate the recompense of these outlays.

3. Taxpayers shall be entitled for ensuring the even inclusion of outlays on the repairs of fixed assets in two and more tax periods to create reserves for forthcoming repairs of fixed assets in the procedure established by Article 324 of this Code.

Article 261. Outlays on the Development of Natural Resources

1. For the purposes of the present Chapter, recognised as outlays on the development of natural resources shall be the taxpayer's expenditures on the geological studies of the earth's bowels, on prospecting for commercial minerals and on the performance of preparatory works.

To the outlays on the development of natural resources shall be referred, in particular:

- outlays made on the search for and on an assessment of the deposits of commercial minerals (including the audit of the stocks), on prospecting for commercial minerals and (or) on the hydrogeological investigations carried out on the plot of the earth's bowels in accordance with the licences or other permits of authorized bodies obtained in the established order, as well as outlays on the acquisition of the necessary geological and other kinds of information from third persons, including from state bodies;

- the outlays on preparing the territory for carrying out the mining, construction and other works in conformity with the established demands made on the safety and protection of the lands, mineral wealth and the other natural resources, and of the natural environment, including on the construction of temporary approach lines and roads for the transportation of the extracted mining rock, useful minerals and wastes, and on preparing the sites for erecting the corresponding structures and for the preservation of the fertile soil layer intended for the subsequent reclamation of the lands and for the storage of the extracted mining rock, commercial minerals and the wastes;

- the outlays on the recompense of the complex damage inflicted upon the natural resources by the land users in the process of the construction and operation of the objects, as well as on the compensation of the losses caused to agricultural production by withdrawal of land for needs not connected with agricultural production and by the destruction and spoilage of deer pastures. To these outlays shall also be referred the compensations envisaged by the contracts (agreements) with local self-government bodies and (or) with the tribal and family communes of indigenous small-numbered peoples, concluded by these land users.

2. The outlays on the development of natural resources made after the present Chapter is put into operation shall be included in the composition of the other outlays in conformity with the present Chapter, if the source of their financing is not the budgetary funds and (or) the resources of the state extra-budgetary funds.

The outlays on the development of natural resources mentioned in Item 1 of the present Article shall be recorded in the order stipulated by Article 325 of the present Code. When effecting the outlays on the development of natural resources concerning several plots of the earth's bowels, the said outlays shall be recorded separately for every plot of the bowels in the part defined by the taxpayer in accordance with the accounting policy he has accepted for taxation purposes. The said outlays shall be recognised for taxation purposes as from the first day of the month next to the month in which the given works (work stages) were completed, and shall be included in the composition of the other outlays in the following procedure:

the outlays stipulated by Paragraph Three of Item 1 of this Article shall be evenly included into the composition of expenditure within 12 months;

the outlays provided for by Paragraphs Four and Five of Item 1 of this Article shall be evenly included into the composition of expenditure within five years but within no longer term than the period of operation thereof.

3. If outlays on the development of natural resources for the corresponding plot of the earth's bowels have proved to be futile, the said outlays shall be recognised for the purposes of taxation as from the first day of the month next to the month in which the taxpayer informed the federal body for the management of the state stocks of mineral wealth or its territorial subdivision about the termination of further geological search, geological prospecting and other kind of works on this plot because of their uselessness.

Recognised as futile shall be the geological search, geological prospecting and other works by the results of which the taxpayer has adopted the decision on stopping further works on the corresponding part of the plot of the earth's bowels because of the lack of prospect for finding deposits of commercial minerals or in connection with the impossibility or the unfeasibility of building and (or) of operating underground structures not involved in the extraction of useful minerals. The procedure stipulated by the present Item shall be applied to the outlays on the development of the natural resources referred to the part of the territory (of the water area) indicated in the corresponding licence. The taxpayer is obliged to keep a separate record on the corresponding part of the territory (of the water area).

The above outlays shall be included in the composition of the other outlays in the procedure provided for by Item 2 of this Article.

4. The procedure for recognising the outlays on the development of natural resources for the purposes of taxation envisaged by the present Article shall also be applied to the outlays on building (boring) prospecting wells in the oil and gas fields which have proved to be unproductive, on carrying out a complex of geological works and tests with the use of this well, and also on the subsequent liquidation of this well. Such procedure shall be applied by the taxpayer, irrespective of whether he goes on with or stops further works on the corresponding plot of the earth's bowels after the liquidation of the unproductive well, under the condition that the outlays on this well are recorded separately. The outlays made on the unproductive well shall be recognised for taxation purposes evenly in the course of twelve months, beginning with the first day of the month next to the month in which this well was liquidated in the established order as not having fulfilled its purpose.

The decision on recognising the corresponding well as unproductive shall be taken by the taxpayer once and for all, and shall not be subject to subsequent change. The taxpayer shall inform the tax body at the place of his recording of the decision adopted with respect to every well not later than the ultimate date fixed by the present Chapter for submitting the tax declaration for the reporting (tax) period into which he has actually included the outlays (part of such outlays) on the well into the composition of the other outlays.

5. The outlays on useless works for the development of natural resources shall not be included in the composition of outlays for the purposes of taxation, if in the course of five years before the moment when the rights to the geological study of the bowels, to the prospecting for and the extraction of useful minerals, or to some other use of the plot of the earth's bowels are granted to the taxpayer, similar kind of works have already been performed on this plot. The given provision shall not be applied if the said works were carried out on the basis of the principally different technology and (or) with respect to different useful minerals.

6. The outlays on the acquisition of works (services) of geological and other kinds of information from third persons, and likewise from state bodies, as well as outlays on a independent performance of the works aimed at the development of natural resources shall be recorded for the purposes of taxation in the amount of actual expenses.