The Enterprise Accounting Standards (EAS) stipulates that depreciation refers to the systematic apportionment of accrued depreciation over the useful life of a fixed asset in accordance with a determined method. Enterprises should reasonably determine the useful life of fixed assets according to the nature and use of fixed assets.
Article 60 of the Regulations for the Implementation of the New Enterprise Income Tax Law stipulates that, except as otherwise provided by the competent departments of finance and taxation of the State Council, the minimum number of years for the calculation of depreciation of fixed assets shall be as follows: (a) houses and buildings, 20 years; (b) airplanes, trains, ships, machinery, machines, and other production equipment, 10 years; (c) appliances, tools, furniture, etc., related to production and business activities, 5 years; (d) airplanes, trains and ships, machines and other production equipment, 10 years; and (e) appliances, tools, and furniture related to production and business activities, 5 years. 5 years; (iv) means of transportation other than airplanes, trains and ships, 4 years; and (v) electronic equipment, 3 years. Article 32 of the Enterprise Income Tax Law stipulates that if the fixed assets of an enterprise require accelerated depreciation due to technological progress or other reasons, the depreciation period may be shortened. Article 98 of the Implementing Regulations stipulates that fixed assets whose depreciable lives can be shortened include: (i) fixed assets whose products are updated more rapidly due to technological progress; and (ii) fixed assets that are subject to strong vibration and high corrosion all year round. If the method of shortening the depreciable life is adopted, the minimum depreciable life shall not be less than 60% of the depreciable life as stipulated in Article 60 of these Regulations.
Difference analysis: accounting based on professional judgment to determine the depreciable life, while the tax law restricts the minimum depreciable life, at the same time provides for the shortening of the depreciable life of the situation, therefore, accounting and tax law is likely to be different. Assuming that both accounting and tax laws are depreciated on a straight-line basis and that all depreciation is recognized in profit or loss: ① If the depreciable life determined by accounting is shorter than the minimum depreciable life prescribed by the tax law, the enterprise should increase its taxable income by the difference between the accounting depreciation and the maximum depreciation permitted by the tax law each year within the depreciable life determined by accounting. After the end of the accounting depreciation life, the enterprise should reduce the taxable income accordingly for the depreciation allowed by the tax law within the remaining depreciation life specified by the tax law. ② If the depreciable life determined by accounting is longer than the minimum life prescribed by the tax law, it can be regarded that there is no difference between accounting and tax law. Enterprises may also apply to the competent tax authorities to calculate the depreciation deducted before tax according to the minimum number of years (or longer) stipulated in the tax law, i.e., the enterprise should reduce its taxable income every year for the difference between accounting depreciation and tax depreciation within the minimum number of depreciable years (or longer) stipulated in the tax law. After the end of the tax depreciation life, the enterprise should be in the accounting determination of the remaining depreciation life, the accounting of the actual depreciation of the corresponding increase in taxable income.