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Can goodwill be ‘depreciated’ for tax purposes?

Tuesday, 30 June 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: It seems to be the current practice to amortise goodwill. I cannot find anything to suggest this is a requirement of the tax act. Can you please advise whether this is a technical requirement?

A: We accept that you refer to the IFRS treatment when you refer to amortising goodwill. 

From a normal tax point of view goodwill is not a depreciable asset – refer to section 1(1) of the Income tax Act – as no section specifically provide for a deduction or allowance in respect of the cost of goodwill.  It is generally accepted that goodwill is capital in nature and therefore a deduction in terms of section 11(a) would also not be possible. 

The only deductions allowed for immaterial property are the ones related to intellectual property, such as patents etc.  It doesn’t include goodwill.

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.



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