The fixed assets of a profit-making enterprise should continue to be depreciated according to the original depreciation method if the fixed assets are left idle due to suspension of business after they start to be used.

According to the Kaohsiung National Taxation Bureau of the Ministry of Finance, if the fixed assets of a profit-making enterprise are idle due to the suspension of business and are not used for business, in accordance with the regulations, unless the depreciation method adopts the working time method or the production quantity method, the actual cost obtained shall be used to depreciate the unused assets. For the depreciation balance, continue to depreciate according to the original depreciation method. The above-mentioned depreciation amount should be listed as current operating expenses or operating costs according to the nature of the fixed assets.

The Bureau gave an example. A certain marine engineering company purchased 3 ships a few years ago, listed them as fixed assets, and depreciated them using the average method. In the past few years, due to poor economic conditions and declining revenue, the company had no choice but to apply for suspension of operations. The port was then idled. However, during the epidemic period, the demand for shipping and maritime services increased, and the market for idled ships rose instantly. The company sold them, resulting in high asset disposal benefits. When calculating the profit and loss of the sale, the company did not list the ships during the suspension period on a yearly basis The depreciation expense was deducted from the unreduced balance, resulting in an overstatement of the unreduced balance, an understatement of the asset disposal benefits and taxable income of more than NT$1.7 million (the same below), and more than NT$300,000 in tax.

The bureau further clarified that, in accordance with the Income Tax Law, the valuation of fixed assets shall be based on the price at which depreciation is deducted from the actual cost of acquisition on a regular basis; depreciation method, production quantity method, working time method or other depreciation methods approved by the competent authority; depreciable fixed assets should be set up as accumulative depreciation items as depreciation items for each asset, and the depreciation of fixed assets should be increased year by year. List. According to this, if the fixed assets of a profit-seeking enterprise are idle due to the suspension of business and are not used for business, the depreciation method adopts the working time method or the production quantity method, and the depreciation cost is zero because it is not actually used for production. For the depreciation method, annual digit method, or other depreciation methods approved by the competent authority, the actual cost shall be depreciated according to the original depreciation method and the undepreciated balance shall continue to be depreciated year by year without interruption.

Provider: Xiaogang Excise Office Contact person: Director Hong Liyu Contact number: (07) 8123746 extension 6000
Contributor: Wang Shujun Tel: (07) 8123746 extension 6032

Issued by: Kaohsiung National Taxation Bureau, Ministry of Finance Release date: 2022-04-18 Update date: 2022-04-18