What useful life should be considered when estimating the TAB factor of an intangible asset?
Amortisation of intangible assets is not always tax deductible. Its deductibility depends on the corporate income tax legislation of single countries. Most countries define maximum amortisation rates or minimum number of years in which the amortisation of intangible assets can be deducted, if at all. This page displays the legal tax amortisation periods of the main types of intangible assets.
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Further Detail and Source Legislation
The yearly maximum tax amortization of intangible assets according to Swedish regulations is determined by comparing the tax base of the previous year with the minimum allowed balance for the current year.
Each year and for each category (type) of assets, one of two methods can be used to calculate the minimum allowed balance:
1) the declining-balance method, where the tax base is calculated as 70% of the previous accounts (book value) plus additions less proceeds of sales; or
2) the 20% straight-line depreciation method based on yearly acquisition cost.
The maximum allowed tax amortization is the difference between the opening tax base and the lowest calculated balance for the tax base resulting from the two methods.
Note that one of the two rules must be used consistently for the same type of asset within the same fiscal year and applied to the entire group of assets of this type, however different methods can be chosen for different fiscal years.
By combining the two methods the regulation generally allows for a tax amortization period of 5 years.
An alternative 25% declining-balance method without correspondence to the books exists but is less commonly used.
- ^ Yearbook of the Supreme Administrative Court (“Regeringsrättens årsbok - RÅ”) 2001 ref. 8
- ^ Chapter 18, Swedish Income Tax Act (“Inkomstskattelagen - IL”)