Most tangible assets used in the course of business may be depreciated for Taiwan tax purpose, except for land.
Depreciation may be calculated using the following methods:
- Fixed percentage on diminishing book value
- Other methods approved by Taiwan's tax authorities
When calculating taxable income, depreciation charges may only be deducted by the legal owner or lessee under a financial lease, and only when the assets are in use.
The service life for depreciation purposes cannot be less than those stipulated in Taiwan's Table of Service Life of Fixed Assets. The exception to this is equipment used to prevent water or air pollution, which can have their service life reduced to two years.
The following summarizes the Table of Service Life of Fixed Assets:
In the case of used assets, depreciation can be calculated based on the difference of the years used and the prescribed service life. In addition, if the service life of an asset is deemed to be less than 2 years, the cost can be deducted as an expense in the year the asset is acquired without need for depreciation.
In general, depreciation is calculated for each fixed asset. However, similar assets may be pooled together and depreciation calculated for each pool of assets.
When calculating depreciation a salvage value must be estimated. This salvage value is first deducted from the cost of the asset before calculating depreciation. When an asset is used beyond its service life, the asset can be depreciated using its salvage value.
When an asset has reached its full service life but the accumulated depreciation hasn't amounted to the cost of the asset, depreciation can continue until it is fully depreciated.
When calculating for the depletion of irreplaceable resource assets, the production-unit method or methods provided by the Taiwan tax authorities can be used. The method applied must be used consistently from year to year.
Intangible Assets, such as patents, trademarks, copyrights, etc., can be amortized for Taiwan tax purposes only if they were acquired through a purchase.
The following table shows the amortization period allowed for certain intangible assets.