The Ministry of Taxes and Duties, in response to queries from taxpayers concerning the inclusion of depreciation amounts for fixed assets acquired under lease agreements in their expenses, provides the following clarification.
In practice, situations arise where individual entrepreneurs involve in their business operations, as fixed assets, vehicles previously acquired by them under lease agreements, where they act as a lessee – an individual.[1]
For reference. The National Bank determines the procedures and conditions for conducting leasing activities within the Republic of Belarus, including specific aspects of concluding, executing, and terminating lease agreements with lessees – individuals.
Lease agreements with lessees – individuals, may, in particular, contain restrictions on the use of the leased asset.[2] In this regard, such a lessee – an individual, must consider the terms of the lease agreement, as if the lease agreement includes restrictions on the use of the leased asset in business activities, and no supplementary agreement is concluded to allow the individual entrepreneur legal grounds for using the vehicle in their business activities (hereinafter – the supplementary agreement), the use of this vehicle in the individual entrepreneur's business is not justified.
Considering the above, an individual entrepreneur is entitled to use a vehicle in their business activities, previously acquired under a lease agreement where they act as a lessee – an individual, provided that such agreement does not contain restrictions on its use.
If the lease agreement provides for restrictions on the use of the vehicle in entrepreneurial activities, then the involvement of a vehicle acquired under such an agreement in entrepreneurial circulation is considered unjustified. Thus, an individual entrepreneur shall account for a vehicle that is the subject of a lease as a fixed asset after the conclusion of an additional agreement.
Fixed assets that are the subject of a lease shall be accounted for at the value specified in the lease agreement (additional agreement) (part five of clause 24 of the Instructions[3]).
The initial cost of fixed assets by an individual entrepreneur is taken into account in expenses by accruing depreciation in the manner determined by Instruction No. 37/18/6[4], taking into account the provisions of subparagraph 22.11 of clause 22 of Article 205 of the Tax Code[5] (part one of clause 26 of the Instructions).
For reference. Issues related to the application of the provisions of Instruction 37/18/6, i.e., issues of depreciation accrual, fall within the competence of the Ministry of Economy.
[1] Lessee – an individual who is not acting as an individual entrepreneur when concluding the lease agreement.
[2] Clause 25 of the Rules for carrying out leasing activities, approved by the Resolution of the Board of the National Bank of the Republic of Belarus of 18.08.2014 No. 526.
[3] Instruction on the procedure for accounting for income and expenses, approved by the Resolution of the Ministry of Taxes and Duties of the Republic of Belarus of 30.01.2019 No. 5.
[4] Instruction on the procedure for calculating depreciation of fixed assets and intangible assets, approved by the Resolution of the Ministry of Economy, the Ministry of Finance, and the Ministry of Architecture and Construction of 27.02.2009 No. 37/18/6
[5] Tax Code of the Republic of Belarus