Depreciation method for newly acquired buildings
For buildings acquired on or after April 1,1998, the declining balance method of depreciation can no longer be applied. Straight line depreciation will be required.
Statutory durable years for buildings
The statutory durable years for a building are shortened by between 10% - 20% from the fiscal year, which begins on or after April 1,1998. For currently owned buildings using the straight line method, the depreciation rate to be applied is increased to reflect the new shorter life. For currently owned buildings using accelerated method, the new rate is applied to net book value of the building as of the beginning of the new fiscal year.
Small depreciable assets
Previously, assets costing less than \200,000 were not required to be capitalized. The capitalization limit of a fixed asset is reduced from Y200,000 to Y100,000 from the fiscal year ,which begins after April 1,1998. Fixed assets for which the acquisition cost is Y100,000 or more and less than Y200,000, can be capitalized in a single combined account for the fiscal year, and depreciated equally over three years. However, the loss for the write off of each assets can't be deducted when the assets are capitalized together. In addition, the fixed assets tax would not be imposed on the fixed assets, when the acquisition cost is \100,000 or more and less than Y200,000 and are capitalized together for the fiscal year. When the fixed assets are capitalized and depreciated individually, the fixed assets tax would be imposed.
Termination of half year convention method
Depreciation of machinery and equipment , which are purchased during the fiscal year, should be calculated on a monthly basis from the fiscal year ,which begins on or after April 1,1998, instead of the half year convention method, which is 50% of the annual depreciation.
Amortization of goodwill
The statutory amortization method for goodwill, which is acquired on or after April 1 ,1998, should be the straight-line method over five years instead of the former statutory method ,which allowed for immediate expensing of acquired goodwill.
Depreciation of assets used for finance lease
A finance lease for corporate tax purposes which is concluded with a non-resident or a foreign corporation on or after October 1,1998 is subject to straight line depreciation if the leased asset is used outside Japan.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For any specific information regarding this article, please feel free to contact Kaoru Sato at 03-3506-2432(telephone) or at 03-3506-2412(fax).