On October 20, 2014, the Ministry of Finance and the State Administration of Taxation issued the Circular on the Corporate Income Tax Policy of Improving Fixed Asset Depreciation (hereinafter, the "Circular"), which entered into effect on January 1, 2014 and is highlighted as follows.
- For enterprises in six industries, namely the biopharmaceutical manufacturing industry, the special equipment manufacturing industry, the railway, shipping, aerospace and other transportation equipment manufacturing industry, the computer, communications and other electronic equipment manufacturing industry, the instrument and apparatus manufacturing industry and the information transmission, software and information technology service industry, fixed assets purchased after January 1, 2014 may be subject to shortened depreciation or accelerated depreciation methods. Newly purchased apparatuses and equipment shared for research, development, production and operation after January 1, 2014 with no more than RMB1 million per unit may be included in the current cost and expense at one time and deducted in the assessment of taxable income. If the unit price exceeds RMB1 million, a shortened depreciation or accelerated depreciation method may be adopted.
- Apparatuses and equipment newly purchased by enterprises in all sectors exclusively for research and development with a unit price not exceeding RMB1 million may be included in the current cost and expense at one time and deducted in the assessment of the taxable income. In case of a unit price in excess of RMB1 million, a shortened depreciation or accelerated depreciation method may be adopted
For the above two provisions, if shortened depreciation is selected, the minimum depreciation period shall not be less than 60% of the depreciation period required under Article 60 of the Regulations for the Implementation of the Enterprise Income Tax Law; and if accelerated depreciation is adopted, the double declining balance method or the sum of years digits method may be adopted.
- For enterprises in all sectors that hold fixed assets whose unit price does not exceed RMB5,000, the unit price may be included in the current cost and expense at one time and be deducted in the assessment of taxable income.