The depreciable life and depreciation rate of plant in fixed assets are mainly based on the Regulations for the Implementation of the Enterprise Income Tax Law of the People's Republic of China. The provisions are as follows:
The minimum depreciable life of buildings and structures is 20 years, and the estimated residual value rate is usually 3%-5% of the original value of fixed assets. For this type of fixed assets, the annual depreciation rate can be calculated by dividing (1 - estimated salvage rate) by the depreciable life and multiplying by 100%, while the monthly depreciation rate is the annual depreciation rate divided by 12. Other types of production equipment, such as airplanes, trains, etc., are depreciated over a period of 10 years, and the depreciation methods and years for the corresponding equipment are different.
It is worth noting that once the depreciable life of a fixed asset is determined, it cannot be changed at will. Enterprises should depreciate them in accordance with the tax law, such as houses and buildings at 20 years, and trains, ships and other production equipment at 10 years. If the accounting depreciation life is inconsistent with the tax law, it may need to be adjusted at the time of the annual income tax return to avoid complexity.
In practice, companies need to pay attention to the scope of depreciation, which is also required in specific cases such as unused equipment and land, taking into account the determination of annual depreciation when the depreciation period spans across years. The salvage rate is generally 5%, but may be higher for foreign companies under certain circumstances.
The depreciation rate can be calculated using the formula (purchase price - salvage value) divided by (purchase price * depreciable life) or (1 - salvage rate) divided by depreciable life, and the monthly depreciation amount is further adjusted according to the formula. Specific depreciation calculations need to be performed in conjunction with the original value, estimated salvage value and depreciable life of the fixed asset.