Accounting Loss on Disposal of Fixed assets for Tax on Income / Profit

Accounting Loss on Disposal of Fixed assets for Tax on Income / Profit

Accounting Loss on Disposal of Fixed asset is non-deductible expense for tax on income (profit). Loss on fixed asset disposal is accounting expense/loss but Cambodia Tax Law does not allow this loss as deductible expense.

Loss on disposal of fixed asset under tax law is deductible expense for tax on income (profit).

Example 1

XYZ Company disposed fixed asset (car), proceed [1]of fixed asset disposal is $20,000 and net book value (NBV) of car is $21,000.

Required

Calculate gain/loss on fixed asset disposal if NBV is based on accounting policy and comment about Cambodia Tax treatment.

Answer

Gain(loss) on fixed asset disposal = proceed – NBV=$20,000-21,000=($1,000)

Amount of $1,000 is loss on fixed asset disposal based on accounting policy, so it is non-deductible expense for tax on income purpose.

[1] proceed : amount received for fixed asset disposal.