The knowledge of depreciation of fixed assets of Chinese enterprises is completely analyzed!

2020/11/21

How to calculate the depreciation of fixed assets of Chinese enterprises? When can you enjoy accelerated depreciation policy? When can I enjoy the one-time deduction policy? Make up today to take you to find out.

First, what is fixed asset depreciation

1. Related concepts: Depreciation of fixed assets refers to the systematic allocation of the amount of depreciation in accordance with certain methods within the service life of fixed assets. The amount of depreciation refers to the balance of the original value of the fixed assets to be depreciated less the estimated net salvage value. If the impairment provision for fixed assets has been made, the accumulated amount of the impairment provision for fixed assets shall also be deducted.

2. The period of depreciation and amortization of fixed assets An enterprise shall calculate depreciation starting from the month following the month when the fixed assets are put into use. Depreciation of a fixed asset which has ceased to be used shall cease to be calculated starting from the month following the month in which the asset has ceased to be used. 

Enterprises shall reasonably determine the expected net salvage value of fixed assets according to the nature and use of fixed assets. Once the estimated net salvage value of a fixed asset is determined, it may not be changed.

General provisions on depreciation

In the tax law, the minimum depreciation period for fixed assets is stipulated as follows:

The serial number

Category

Minimum depreciation life

1

House, building

20 years

2

Aircraft, trains, ships, machines, machinery and other production equipment

10 years

3

Appliances, tools, furniture, etc. related to production and business activities

5 years

4

Means of transport other than aircraft, trains and ships

4 years

5

Electronic equipment

3 years

 

Policy basis: Article 60 of the Regulations for the Implementation of the Enterprise Income Tax Law of the People's Republic of China

Provisions for accelerated depreciation

1. All industries

In order to support entrepreneurship and innovation and promote technological transformation of enterprises, the state has implemented a series of preferential tax policies for accelerated depreciation of fixed assets. Fixed assets whose depreciable life may be shortened or whose depreciation may be accelerated as mentioned in article 32 of the enterprise income tax law include :(1) fixed assets whose products are rapidly replaced due to technological progress;(2) fixed assets which are in a state of strong vibration and high corrosion all year round. If the method of shortening the life of depreciation is adopted, the minimum life of depreciation shall not be less than 60% of the life as stipulated in Article 60 of these Regulations; If the method of accelerated depreciation is adopted, the method of double decreasing balance or the method of summation of years may be adopted.

Policy basis: As stipulated in Article 98 of the Regulations for the Implementation of the Enterprise Income Tax Law of the People's Republic of China

2. Key industries

Enterprises can calculate software according to fixed assets or intangible assets, and the depreciation or amortization period can be shortened appropriately, with a minimum of 2 years. 

3. The depreciation life of production equipment of integrated circuit production enterprises can be shortened appropriately, with a minimum of 3 years (including).

on January 1, 2014 of biological medicine manufacturing industry, special equipment manufacturing industry, railway, shipbuilding, aerospace and other transport equipment manufacturing, computer, communications, and other electronic equipment manufacturing industry, instrument manufacturing, information transmission, software and information technology services and other industry enterprises (hereinafter referred to as the six major industries), January 1, 2014 for future purchase of fixed assets (including construction), allowed by not less than 60% of the enterprise income tax law depreciation fixed number of year shortened depreciation fixed number of year, or choose to adopt double declining balance method or sum of method of accelerated depreciation. For instruments and equipment newly purchased from small profit-making enterprises in the above six industries after January 1, 2014 for the common use of r&d, production and operation, if the unit value does not exceed RMB 1 million RMB, it is allowed to be included in the current cost in a lump sum and deducted when calculating the taxable income amount. Depreciation will not be calculated annually. If the unit value exceeds 1 million RMB, the depreciation period may be shortened or the depreciation method may be accelerated.

Policy Basis: Notice of the State Administration of Taxation of the Ministry of Finance on Improving the Enterprise Income Tax Policy on Accelerated Depreciation of Fixed Assets (Caicai [2014] No.75) Notice of the State Administration of Taxation on Issues Related to Accelerated Depreciation of Fixed Assets Tax Policy (Notice of the State Administration of Taxation [2014] No.64)

As of January 1, 2015, enterprises can choose to shorten the depreciation period or accelerate the depreciation method for the newly purchased fixed assets (including self-built assets) of enterprises in four key industries, including light industry, textile, machinery and automobile, etc. after January 1, 2015.If the unit value of newly purchased instruments and equipment used for r&d, production and operation of small profit-making enterprises in the above industries does not exceed RMB 1 million after January 1, 2015, they are allowed to be included in the current cost in a lump sum and deducted when calculating the taxable income amount, and the depreciation will not be calculated annually. If the unit value exceeds 1 million RMB, the enterprise may choose to shorten the depreciation period or adopt the method of accelerating depreciation.

Policy basis: the Ministry of Finance the state administration of taxation on further perfecting the accelerated depreciation of fixed assets of enterprise income tax policy notice (caishui [2015] no. 106), the state administration of taxation on further perfecting the accelerated depreciation of fixed assets of enterprise income tax policy announcement concerning the issues (the state administration of taxation announced [2015] no. 68)

on January 1, 2019 since January 1, 2019, apply to the Ministry of Finance the state administration of taxation on perfecting the accelerated depreciation of fixed assets of enterprise income tax policy notice (caishui [2014] no. 75) and the Ministry of Finance the state administration of taxation on further perfecting the accelerated depreciation of fixed assets of enterprise income tax policy notice (caishui [2015] no. 106) stipulated discount for use accelerated depreciation of fixed assets of the industry scope, expanded to all the manufacturing sector.

Policy Basis: Notice of the State Administration of Taxation of the Ministry of Finance on Expanding the Application Scope of Preferential Policy on Accelerated Depreciation of Fixed Assets (Notice of the State Administration of Taxation of the Ministry of Finance No. 66 of 2019)

Iv. One-time deduction policy

From January 1, 2014

1. If the unit value of newly purchased instruments and equipment specially used for research and development by all enterprises in the industry after January 1, 2014 does not exceed RMB 1 million RMB, it is allowed to be included in the current cost in a lump sum and deducted when calculating the taxable income amount, and depreciation will not be calculated annually; If the unit value exceeds 1 million RMB, the depreciation period may be shortened or the depreciation method may be accelerated.2. Fixed assets held by enterprises in all industries with unit value not exceeding RMB 5,000 are allowed to be included in the current cost in a lump sum and deducted when calculating the taxable income amount. Depreciation is not allowed to be calculated annually.

Policy Basis: Notice of The State Administration of Taxation of the Ministry of Finance on Improving the Enterprise Income Tax Policy on Accelerated Depreciation of Fixed Assets (Caicai [2014] No.75)

1 January 2018 solstice 31 December 2020

If the unit value of the equipment and appliances newly purchased by an enterprise during January 1, 2018 and December 31, 2020 does not exceed 5 million RMB, they are allowed to be included in the current cost in a lump sum and deducted when calculating the taxable income amount, and the depreciation will not be calculated annually.

Policy Basis: Notice of the State Administration of Taxation on Equipment and Appliances Deduction of Relevant Enterprise Income Tax Policies (Caishui [2018] No. 54) Notice of the State Administration of Taxation on The Implementation of Equipment and Appliances Deduction of Relevant Enterprise Income Tax Policies (Notice of the State Administration of Taxation No. 46 of 2018)

January 1, 2020 solstice December 31, 2020

For the newly purchased equipment for the purpose of expanding the production capacity of the key material production enterprises for epidemic prevention and control, one-time costs in the current period shall be allowed to be deducted from the enterprise income tax before tax.