Recent Circular Allows Reduction in Asset Amortization Period for Certain Industries
A recent circular from the PRC Ministry of Finance and the PRC State Administration of Taxation introduces, retroactively from January 1st, 2015, the possibility (at the taxpayer’s own discretion) for companies operating in the fields of light industry, textiles, machinery, or automobiles to reduce the number of years required for the amortization of their fixed assets purchased after January 1st, 2015.
The circular further clarifies that the cost for the purchase of instruments or equipment not exceeding 1 million Chinese Yuan, acquired by such companies after January 1st, 2015, may, if these companies are also considered “low-profit”, be reported in full as a one-off cost and calculated for the determination of taxable income, without the need for further amortizations. If the value of these goods exceeds 1 million Chinese Yuan, such companies may adopt, at their own discretion, the “fast amortization” option.
Finally, the circular also specifies that the minimum years required for “fast amortizations” shall not be lower than 60% of the years required for regular amortization (i.e., based on current regulations, ranging from three to 20 years, depending on the fixed assets to be depreciated).
