(Taoyuan News) The National Taxation Bureau of Northern Area indicated that according to the Guidelines for Examination of Profit-Seeking Enterprise Income Tax, Article 95.1.13, revised January 03, 2017, when a passenger sedan newly purchased by a profit-seeking enterprise is depreciated in accordance with its estimated useful life, there is a depreciation limit of NT$1.5 million on passenger sedans but NT$2.5 million on passenger sedans newly purchased after January 1, 2004. The calculation formula of excessive depreciation is listed below:
Depreciation value based on actual cost  ( 1 – cost limitation / total actual cost ) = excessive depreciation value
 
The Bureau gives an example that company A purchased a luxury sedan on Jan 1, 2016. The sedan cost NT$6 million and had an estimated useful life of five years with its residual value expected to be NT$1.5 million. The depreciation expense of the sedan for each year would be NT$900 thousand = [ (6 million – 1.5 million) / 5 years ]. According to the formula prescribed above, the excessive depreciation value is NT$525 thousand = [ 900 thousand  (1 – 2.5 million / 6 million ]. Therefore, company A can report only NT$375 thousand = ( 900 thousand – 525 thousand) depreciation expense in its annual income tax returns.

The Bureau further notes that the profit-seeking enterprise should be aware of the depreciation limit and that the aforementioned sedan, after having been used or is sold, destroyed, or scrapped, its income or loss shall be computed on the basis of undepreciated value when purchasing a high-priced sedan.

For more information on relevant aspects of this issue, you may visit the website of the Bureau at / or use our toll-free service at 0800-000321.