For depreciation of intangible assets, the Tax Code introduced a classification of such assets into six groups and established depreciation periods for each group. Depreciation was proposed to be calculated using the following methods:

• straight-line, under which annual depreciation is determined by dividing the depreciable value by the useful life of the fixed asset;

• reducing balance, under which annual depreciation is determined as the carrying value of the asset at the beginning of the reporting year, or its original value on the date depreciation begins, multiplied by the annual depreciation rate. The annual depreciation rate, expressed as a percentage, is calculated as one minus the result of taking the root corresponding to the number of years of useful life from the ratio of the asset's residual value to its original value;

• accelerated reducing balance, under which annual depreciation is determined as the carrying value of the asset at the beginning of the reporting year, or its original value on the date depreciation begins, multiplied by an annual depreciation rate calculated according to the asset's useful life and doubled. This method applies only to fixed assets in group 4 (machinery and equipment) and group 5 (vehicles);

• cumulative method, under which annual depreciation is determined as the depreciable value multiplied by a cumulative coefficient. The cumulative coefficient is calculated by dividing the number of years remaining until the end of the fixed asset's useful life by the sum of the years of its useful life;

• production method, under which monthly depreciation is determined as the actual monthly volume of products, works or services multiplied by the production depreciation rate. The production depreciation rate is calculated by dividing the depreciable value by the total volume of products, works or services that the company expects to produce or perform using the fixed asset.

Unlike the previous legislation, the depreciable value of fixed assets, other non-current assets and intangible assets was understood as their original or revalued value less their residual value, as in accounting.

Depreciation of low-value non-current tangible assets and library collections may be charged in the first month of use of the asset at 50% of its depreciable value, with the remaining 50% charged in the month when the assets are withdrawn from use and written off the balance sheet because they no longer meet the asset recognition criteria, or at 100% of their value in the first month of use.

For tax purposes, a company charges depreciation using the method specified in its accounting policy order for depreciation used in preparing financial statements. Thus, the same depreciation methods are applied for tax and accounting purposes.

The depreciation method for a fixed asset may be reviewed if the expected method of obtaining economic benefits from its use changes and must correspond to changes in the method specified in the accounting policy. Depreciation under the new method begins from the month following the month in which the decision to change the depreciation method is made.

The Tax Code, Article 146, also provides for revaluation of fixed assets, which is analogous to indexation of the carrying value of fixed assets under the previous Profit Tax Law. At the same time, as under the previous legislation, any other revaluation, upward or downward, of the carrying value of fixed assets carried out under accounting rules is not reflected for tax purposes. It should be noted that paragraph 6 of subsection IV of the Tax Code of Ukraine limited the possibility of recognising upward revaluation because the revalued value of fixed assets does not include the amount of upward revaluation carried out after 1 January 2010.

As before, expenses for current or capital repairs of fixed assets may be included in tax expenses; the limit for such inclusion, 10%, is calculated from the aggregate carrying value of all groups of fixed assets at the beginning of the reporting year.

The value of goodwill, as stated in the Tax Code and the Profit Tax Law, is not subject to depreciation and is not taken into account when determining the expenses of the taxpayer in respect of whose assets such goodwill arose.

Special attention should be paid to paragraph 6 of subsection 4 “Special rules for corporate profit taxation” of Section XX of the Tax Code of Ukraine, which established the transition to the new depreciation rules from 1 April 2011. To determine the list of fixed assets, other non-current assets and intangible assets under the new groups for depreciation purposes, inventory data as at 1 April 2011 were used from that date. The depreciable value of each fixed asset, other non-current asset and intangible asset was determined as its original or revalued value, including capitalised expenses for modernisation, modification, extension, additional equipment, reconstruction and similar improvements, and accumulated depreciation according to accounting records as at 1 April 2011.

It should be noted that the above rules also apply to taxpayers when they move from the simplified tax system to the general system. Thus, single-tax payers may recognise for tax purposes depreciation charged on fixed assets acquired or produced while they were under the simplified system.

If the total value of all groups of fixed assets according to accounting records was lower than the total value of all groups of fixed assets according to tax records as at 1 April 2011, the temporary difference arising from that comparison was depreciated as a separate asset using the straight-line method over three years.

The useful life of fixed assets, other non-current assets and intangible assets for depreciation from 1 April 2011 was determined independently by the taxpayer, taking into account the date they were placed in service, but not less than the minimum useful-life periods established by Article 145 of Section III of the Tax Code of Ukraine. The original value of fixed assets was not increased by the cost of acquisition or improvement after 1 April 2011 to the extent of expenses attributed to an increase in the carrying value of the assets before that date.