On September 17, 2015, the MoF and the SAT jointly issued Circular Cai Shui [2015] No. 106 (“Circular 106”) to further expand the preferential EIT policies related to accelerated depreciation of fixed assets to new key industries. Circular 106 came into effect retrospectively on January 1, 2015.

The main highlights of Circular 106:

  1. Enterprises conducting businesses in key light, textile, machinery and automobile industries 5 can shorten the tax depreciation period or adopt tax accelerated depreciation methods for fixed assets purchased after January 1, 2015:
    • If an enterprise shortens the tax depreciation, the minimum tax depreciation period must not be shorter than 60% of the statutory tax depreciation periods provided under EIT law.
    • If an enterprise adopts tax accelerated depreciation methods, it can choose the double declining balance method or the sum of the years’ digits method.
  2. If these enterprises also qualify as small and low-profit enterprises, they can deduct the total acquisition cost as a yearly expense for instruments or equipment with a unit value not exceeding RMB 1 million and acquired to be used in research and development activities and in production and operation activities.

Date of issue: September 17, 2015. Effective date: January 1, 2015.