For tax purposes, depreciation is calculated using the straight-line or declining balance method, based on the useful lives and rates published by the Ministry of Treasury and Finance. Fixtures whose value does not exceed a certain amount can be expensed directly.
Under TFRS, by contrast, useful life is based on the entity's own estimate; the difference gives rise to deferred tax.
Source: Tax Procedure Law No. 213 Art. 313-321
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Declining balance methodA method in which the depreciation rate is applied each year to the asset's remaining net book value, resulting in higher depreciation in the early years.Direct expensing limitThe limit, updated each year, below which fixtures and goodwill can be expensed directly without being depreciated.Property, plant and equipmentPhysical assets used in the production of goods and services, for rental or for administrative purposes, and expected to be used for more than one period.Deferred taxTax payable or recoverable in future periods, calculated on temporary differences between the carrying amounts of assets and liabilities in the financial statements and their tax bases.Advance taxTax paid in advance during the year by income and corporate taxpayers, in quarterly periods, on current-period earnings.Arm's length principleThe principle that transactions between related persons should be carried out at the prices and on the terms that would apply between independent parties with no such relationship.
Last updated: October 22, 2026 · This definition is for general information only.