Quick answer: Fixed-asset depreciation is both an accounting and a tax expense — but the two systems are not identical. CIT accepts depreciation only within the time frames guided by the Ministry of Finance, by asset group. Depreciating faster than the frame gets the excess disallowed; depreciating slower is a self-inflicted cash-flow cost.
Applicable legal bases
The instruments below are in force as of the writing date (20/10/2026) and directly govern this article:
- Corporate Income Tax Law 67/2025/QH15 (effective 01/10/2025) — deductible depreciation principles.
- Law on Tax Administration 108/2025/QH15 (effective 01/7/2026, replacing Law 38/2019/QH14) — filing and finalization.
- Ministry of Finance guidance on fixed-asset management, use and depreciation (check the current version when applying; formerly Circular 45/2013/TT-BTC) — depreciation time frames by asset group.
- Decree 125/2020/ND-CP — administrative penalties for tax and invoice violations.
In-depth analysis
The depreciation time frame is the “speed” at which the law lets an enterprise expense an asset’s value. Factory buildings 25-50 years, machinery 5-15 years by type, transport vehicles 6-10 years — each group its own frame. The enterprise picks a specific period within the frame and must apply it consistently; mid-course changes without proper justification and procedure invite challenge.
Where foreign investors often stumble is the gap between accounting and tax depreciation. Accounting standards allow useful-life estimates based on technical reality, while tax mandates the administrative frame. A high-tech line with a 3-year technical life but a 5-year minimum tax frame: books depreciate over 3 years, tax accepts 5 — the 2-year gap creates temporary differences to track and adjust on the tax return every year.
Three special situations deserve attention. First, used assets: the depreciation period is redetermined on remaining value and remaining life, not the new-asset frame. Second, accelerated depreciation: available only to qualifying enterprises within permitted limits, not a universal free choice. Third, idle assets awaiting disposal: stop depreciating and handle the residual value per rules — continuing to depreciate creates disallowed expense.
Five depreciation decisions
- Classify into the right group: check the frame per asset group in the current guidance; misclassification means a wrong frame.
- Pick a period within the frame: balance tax benefit (fast within-frame depreciation) against financial-statement stability.
- Register the method: straight-line, declining-balance or units-of-production — consistent across periods and suited to the asset.
- Handle used assets: redetermine the period on remaining value and life, with an appraisal dossier.
- Track tax-accounting gaps: maintain an annual temporary-difference reconciliation for correct filing.
Common risks and prevention
- Depreciating faster than the minimum frame: the excess is fully disallowed for tax. Check the frame before locking the period.
- No gap adjustments: plugging book depreciation straight into the tax return. Keep a separate temporary-difference schedule.
- Depreciating idle assets: mothballed machines still depreciating. Stop when the asset no longer serves the business and handle the residual correctly.
- New-asset frames for old machines: an 8-year-used machine depreciated on a 10-year new-asset frame. Redetermine the period on remaining life.
Frequently asked questions
1. May the depreciation period be changed mid-course?
Yes with proper justification (function change, life reassessment) and correct procedure. Arbitrary changes to manage profit get the difference disallowed.
2. Is accelerated depreciation available to everyone?
No. It applies only to qualifying enterprises within permitted limits — check the current text; do not self-apply.
3. May finance-leased assets be depreciated?
The lessee may depreciate if the asset meets finance-lease recognition conditions under current accounting and tax rules. Distinguish finance leases from operating leases.
4. Is leased land depreciable?
Annual-payment land-use rights are not depreciated; rent hits expense each year. Definite-term lump-sum land-use rights are amortized over the term.
Key takeaway for investors
Lock the depreciation policy when an asset enters service: correct group classification, an in-frame period, a registered method and a tax-accounting gap tracker. Depreciation is a manufacturing project’s largest non-cash expense — well managed, it yields steady tax savings every year.
This article has been quality-reviewed by the FLAW AI Legal Council This content is legal reference only and does not replace counsel for a specific case.
