What is Declining Balance Depreciation?
Declining balance depreciation is an accelerated method that charges a higher depreciation expense in the early years of an asset’s life and lower amounts later. The annual charge is a fixed percentage applied to the asset’s net book value at the start of each period.
How It Works
- Pick a depreciation rate (often double the straight-line rate for double-declining balance).
- Apply the rate to the asset’s opening net book value each year.
- Switch to straight-line in the final years to fully depreciate the asset.
Saudi Context
ZATCA’s corporate tax rules permit declining balance for certain asset categories — for example, industrial machinery at 25% — making it a useful tool for tax planning in Saudi manufacturing.
Example
Equipment costing SAR 100,000 depreciated at 25% declining balance: year 1 SAR 25,000, year 2 SAR 18,750, year 3 SAR 14,063.