NOTICE OF MINISTRY OF FINANCE AND STATE ADMINISTRATION OF TAXATION CONCERNING ENTERPRISE INCOME TAX POLICIES ON ACCELERATED DEPRECIATION OF FIXED ASSETS (CAISHUI [2014] NO. 75) (财政部、国家税务总局关于完善固定资产加速 折旧企业所得税政策的通知)

On October 20, 2014, the Ministry of Finance and the State Administration of Taxation (“SAT”) jointly enacted circular Cai Shui [2014] No.75 (“Circular 75”) concerning enterprise income tax (“EIT”) policies on accelerated depreciation of fixed assets. Circular 75 came into effect retrospectively on January 1, 2014.

The main highlights of Circular 75 are as follows:

  • Enterprises conducting businesses in six industries can shorten the tax depreciation period or adopt tax accelerated depreciation methods for fixed assets purchased after January 1, 2014.

These six industries are biopharmaceutical manufacturing; special equipment manufacturing; railway, ship, aerospace and other transportation equipment manufacturing; computer, communication and other electronic equipment manufacturing; instrument and apparatus manufacturing; and information transmission, software and information technology services.

If small and micro-enterprises engaged in any of the above six industries purchase instruments or equipments after January 1, 2014, the use of which is shared for development, production and operation, and if the unit value does not exceed RMB 1 million, enterprises can choose to deduct the total acquisition cost as an expense of the year to calculate the EIT base. If the unit value is more than RMB 1 million, enterprises can shorten the tax depreciation period or adopt tax accelerated depreciation methods for these instruments and equipment. If any enterprise purchases instruments or equipments after January 1, 2014, which are solely used for development, and if the unit value does not exceed RMB 1 million, the enterprise can choose to deduct the total acquisition cost as an expense of the year to calculate the EIT base. If the unit value is more than RMB 1 million, the enterprise can shorten the tax depreciation period or adopt tax accelerated depreciation methods for these instruments and equipments.

  • If an enterprise has fixed assets the unit value of which does not exceed RMB 5,000, it can choose to deduct the total acquisition cost as an expense of the year to calculate the EIT base.
  • If an enterprise shortens the tax depreciation period in accordance with the above policies, 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 in accordance with the above policies, it can choose the double declining balance method or the sum of the years’ digits method.

Date of issue: October 20, 2014. Date of effectiveness: January 1, 2014.