On November 29, the Business Ombudsman Council held the discussion of solar power plants depreciation (SPP) with the participation of the Ministry of Finance, Ministry of Energy , STS, industry representatives and business associations (in particular, the Ukrainian League of Industrialists and Entrepreneurs, American Chamber of Commerce in Ukraine, European Business Association, European-Ukrainian Energy Agency and Solar Energy Association of Ukraine).
The discussion concerned the way of calculating depreciation for solar power plants equipment, particularly whether such equipment could be accounted as separate fixed assets with different lifetimes.
The Council periodically receives complaints from businesses related to the practice of tax authorities to consider a solar power plant as a complete fixed asset, namely as a “structure” with the application of a unified 15-year depreciation period, regardless of the useful life of the equipment being a part of it. It results in taxation base increase and business expenses reduction in the mid-term prospects.
Business considers such tax bodies’ approach incorrect, because accounting rules directly provide for the right to separate depreciation of fixed assets parts, if they have different operation periods. A component approach allows for taking into account SPP basic parts wear and tear more accurately.
During the discussion the Ministry of Energy representative upheld the position business, stressing strategic importance of creating favorable conditions for investors in this field. The Ministry of Finance representative confirmed the component depreciation fundamental possibility, however pointed out objective difficulties in providing explanations of applying national accounting standards for various industries. At the same time, business associations expressed their readiness to participate in developing draft explanations. The Business Ombudsman Council also supported the idea of developing explanations, because it would provide legal certainty in this sphere and contribute to investment attractiveness of Ukraine’s renewable energy market.
The Business Ombudsman hopes this discussion will contribute to both understanding between business and tax officials and cooperation among state authorities engaged to define a single approach to SPP depreciation, given the renewable energy industry importance for covering generating capacities deficit during the war, minimizing dependence on external suppliers and diversifying energy resources.
