Requirements for Profit-seeking Enterprises to Recognize Losses from Scrapping Fixed Assets

National Taxation Bureau of the Southern Area, Ministry of Finance (hereinafter “the Bureau”) stated that when scrapping fixed assets, profit-seeking enterprises should be aware of the scrapping procedures depending on whether the fixed assets have reached the full period of their useful years. In addition, proceeds from the sale of scraps shall be recognized as revenues.

The Bureau explained that if the fixed assets are destroyed or become obsolete before the end of their prescribed service years due to specific reasons, the enterprise may list the undepreciated value as losses for the proper fiscal year by submitting reliable documentary evidence and recognize proceeds from the sale of scraps as revenues. The documentary evidence can be independent accountant’s attestation reports on financial accounting or on annual profit-seeking enterprise income tax, along with the relevant supporting documents, or verified documents issued by the competent authority including the names, quantities, and amounts of the fixed assets that have been monitored and destroyed. However, if the above-mentioned scrapped certification cannot be obtained, the profit-seeking enterprise shall apply to the competent national taxation bureau for approval in advance.

If the fixed assets which have been completely depreciated are destroyed or become obsolete at the expiration of their useful years, the difference of the residual value previously estimated over the proceeds from sale of scraps may be charged to loss for the current year. In case the proceeds from sale of scraps exceed the residual value previously estimated, the difference shall be charged to income of the current year. The Bureau further explained that when fixed assets are scrapped upon having been completely depreciated at the end of their useful years, although there is no need for enterprises to report with the competent national taxation bureau, the enterprises are still required to retain sufficient evidence to prove the fact of scrapping, such as before-and-after photos, hard copies of clearing and removal process, vouchers related to the sales of the fixed assets or recycling business receipts, etc. for the competent national taxation bureau to verify. 

The Bureau would like to specifically remind profit-seeking enterprises to pay attention to the declaration requirements and preserve relevant supporting documents of scrapped fixed assets for verification. Additionally, in cases where the scrapped assets are sold as scrap materials, do not forget to declare the revenue from the sale. 

Press Release Contact: Ms. Yen
Profit-seeking Enterprise Income Tax Division
TEL: 06-2223111ext.8036

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