China Taxation
Notice on Adjustment of Fixed Assets Depreciation Related Policy |
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| A notice (Caishui [2018] No. 54) was jointly released by Ministry of Finance and Administration for Taxation, stipulating that fixed assets of equipment and instruments purchased from 1 January 2018 to 31 December 2020 with unit value no higher than RMB 5 million are allowed to be recognized as one-off current costs or expenses to offset taxable income when calculating corporate income tax and are not required to calculate depreciation on year basis; For equipment and instruments with unit value exceeding RMB 5 million, depreciation shall continue to be calculated in accordance with the old depreciation related provisions. |
| 1. |
Fixed assets allowed to be recognized as one-off current costs or expenses shall meet the following requirements simultaneously: |
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（1） |
Type of fixed assets: equipment and instruments (tenement and buildings are excluded); and |
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（2） |
Procurement period: from 1 January 2018 to 31 December 2020; and |
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（3） |
Unit value: value for a single separate equipment or instrument; the value does not refer to whole set combined by several separate equipment or instruments or several pieces of equipment or instruments; and |
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（4） |
Amount of unit value: no higher than RMB 5million. If input VAT generated by purchasing fixed assets can be used to offset output VAT, the limit of RMB 5 million refers to VAT excluded amount; otherwise, it refers to VAT included amount. |
| 2. |
Accounting Treatment and Tax Adjustment: |
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（1） |
As per the aforesaid latest regulation, In order to enjoy the preferential corporate income tax policy in time, the enterprise can arrange accounting adjustment in May 2018 at the earliest, so as to decrease the corporate income tax payable for second and third quarter of year 2018 and reduce the quarterly prepaid corporate income tax: |
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a. Fixed assets purchased after 1 May 2018 shall be recognized as one-off current costs or expenses and shall not be depreciated;
b. Fixed assets purchased from 1 January 2018 to 30 April 2018 shall be carried forward to the account of fixed assets disposal and eventually recognized as current costs or expenses.
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（2） |
Enterprise can also choose to continue the current depreciation method. For the difference caused by depreciation between tax and accounting, tax adjustment could be arranged when doing the annual corporate income tax reconciliation. |
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