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Corporate Income Tax in China: Fixed Assets Can Now Be Deducted

Posted by: DongNi Jiang
Category: Tax and Regulations in China

Equipment and Appliances are now Deductible from Enterprise Income Tax in China

In order to stimulate enterprises investing into new equipment and appliances, the State Administration of Taxation, together with the Ministry of Finance, and local taxation bureaus, jointly notified the enterprise income tax. With the Notice of Deduction of Equipment and Appliances Related to Corporate Income Tax – 财税 Cáishuì [2018] n. 54), issued on May 7th, 2018, newly purchased fixed assets, including equipment and appliances but excluding buildings and houses, are deductible from corporate income tax.

According to the new notice, from January 1st, 2018 up to December 31st, 2020, fixed assets that can now be deducted as costs before tax are specified as follows:

  • The newly purchased equipment and appliances, with a unitary value of no more than CNY 5 million, can be included in costs and deducted from the taxable income. The annual calculation of depreciation is no longer needed.
  • For newly purchased equipment and appliances with a unitary value of more than CNY 5 million the old relevant regulation still applies (Cai Shui [2014] No. 75). In other words, the annual calculation of depreciation is still needed.

 

As emerged with the Government Working Report in March 2018, China is undergoing a taxation reform. The ultimate aim is to make the taxation system flexible, incentivizing companies (especially State-Owned Enterprises) to modernize their equipment, invest in new resources, and upgrading production. This new policy can be indeed regarded as a continuation of the taxation system reform, started this year with the VAT rates’ cuts.

We warmly suggest contacting our tax experts to fully understand how to calculate fixed assets deductions from corporate income tax.

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Author: DongNi Jiang

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