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Restatement of balances
The restatement will cover tangible assets owned or used under financial leasing agreements. The amount of the restatement shall be determined by the application of specified coefficients to the acquisition cost of the assets and to their amortization. The coefficients are to be established by regulations and should reflect the effect of the inflation on the valuation of the assets. The amount of the restatement would be adjusted by a coefficient reflecting the company´s indebtedness in the preceding five years. The amount of the restatement must be allocated to a special reserve, which may eventually be used to offset book losses, or to increase capital or, after ten years, to distributable reserves.
The restated value of the assets will be their tax basis going forward. However, the tax deductible depreciation will only be based on this new tax basis for financial years starting January 1, 2015 or after. The government wants to have its cake and eat it: to raise quick cash with the 5% charge on the restatement, without allowing the corresponding increased tax depreciation for two years.
The possibility of applying this restatement is especially relevant for companies with large investments in tangible fixed assets, as it is usually the case in the energy and extractive sectors. From a tax perspective, companies should weigh the immediate one-time 5% cost on the restatement amount versus the step-up in the basis of their assets, which will reduce future taxable income through increased depreciation or smaller capital gains. It is too early to know which degree of acceptance this possibility will have among businesses, but the fact that the tax savings of higher tax depreciation will only be available after two years may be a significantly deterring factor.