Laws of the People's Republic of China

The Ministry of Finance, the State Administration of Taxation

Notice of the Ministry of Finance and the State Administration of Taxation on the Assets Depreciation and the Implementation Caliber of Amortization Policy in the Northeast Old Industrial Base

Cai Shui [2005] No. 17

Departments (Bureaus) of finance , bureaus of state taxes and local taxes in Liaoning province, Jilin province, Heilongjiang province and Dalian city as well as financial supervisory commissioners' offices of the Ministry of Finance stationed in Liaoning province, Jilin province, Heilongjiang province and Dalian city:

In order to further implement the preferential policy of Corporate Income Tax for revitalization of Northeast industrial base, to avoid the emergence of loophole in tax administration, the implementation and administration concerning reduction of period of depreciation of fixed asset and intangible assets amortization in the enterprises of Northeast old industrial base (hereinafter referred to as "enterprise"), is notified as follows:

1.

The fixed assets depreciated by reducing the period of depreciation by no more than 40% refers to the fixed assets purchased by enterprises after July 1, 2004 and those purchased yet have not finished depreciation prior to July 1, 2004. The fixed assets purchased prior to July 1, 2004 (tenement and building excluded) shall reduce the period of depreciation by no more than 40% since July 1, 2004 on the basis of unfinished period of depreciation.

The amortization of intangible assets shall be conducted in accordance with the above-mentioned provision.

2.

The "current provisions" concerning period of depreciation refers to the professional financial system enacted by enterprises and the related national provisions. The declining balance method or sum of the years' digits regulated in " Notice of the State Administration of Taxation on Subsequent Administration Arrangement Concerning Examination and Approval Authority on Fixed Asset Accelerated Depreciation Transferred to Lower Level Administration Department" ( Guo Shui Fa [2003] No. 113 ) adopted by enterprises prior to July 1, 2004, shall not be applicable to the means of shortened period of depreciation.

3.

With respect to the newly purchased fixed assets (tenement and building excluded) after July 1, 2004, the enterprise concerned may choose either the shortened period of depreciation and declining balance method or sum of the years' digits, yet shall not choose both. Once the above-mentioned method is decided, the enterprise shall not adjust it at will in following years.

4.

The enterprise may choose the proportion of the shortened period of depreciation within the range of 40%. Once decided, this proportion shall not be adjusted at will in the following years. The enterprise may choose the method of partial fixed assets accelerated depreciation. Once this range decided, it shall not be adjusted at will.

5.

With regard to the shortened period of depreciation of fixed assets and intangible assets in enterprises, the tax authorities shall take the management style of afterward record or demand taxpayer annotation in the process of tax declaration and may not conduct examination and approval; dynamic management shall be conducted by tax authorities through establishing account of fixed assets and intangible assets depreciation (amortization).

The Ministry of Finance

The State Administration of Taxation

February 2, 2005