Calculation of Tax Evaluation Amounts 

Use

The report calculates your assets’ tax evaluation amounts as of January 1). Broadly speaking, the tax evaluation amount is last year’s tax evaluation amount minus remaining-rate depreciation (see below).

Features

Starting Tax Evaluation Amount

The Property Tax Report reads last year’s tax evaluation amount from last year’s property tax declaration. This forms the starting point for calculating this year’s tax evaluation amount. Note that if you have posted a manual adjustment to the starting tax evaluation amount, the report changes the starting tax evaluation amount accordingly (see Changes to Last Year’s Tax Book Values and Evaluation Amounts).

Depreciation

When the report has determined the asset’s starting tax evaluation amount, it multiplies it by the prescribed remaining rate. It also applies any additional depreciation, if applicable. The formula is as follows:

Starting tax evaluation amount × [Remaining rate × (1 + Additional depreciation rate)]*

*The expression in the square brackets is rounded to the nearest three decimal places.

The report never sets the tax evaluation amount below the statutory minimum (see Minimum Tax Evaluation Amounts).

Assets in Their First Year

For assets in their first year, the same procedure applies, with one or two exceptions:

·        The basis for calculating an asset’s tax evaluation amount is its acquisition and production costs (APC), excluding any investment support or special depreciation.

·        The remaining rate is different in the first year (see Remaining-Rate Depreciation).

The formula is identical to the one given under “Depreciation” above.

Sometimes, an asset’s book depreciation does not start in the same year as you purchase it. For more information about how the system handles these transactions, see:

·         Assets Whose Depreciation Starts in Earlier Tax Years

·         Assets Whose Depreciation Starts in Later Tax Years

Example

On March 1, you purchase an asset for JPY 41,980,000. It has an expected useful life of five years.

The prescribed depreciation rate for assets with useful lives of five years is 0.369. The remaining rate in the first year, therefore, is 0.815, and in all other years, 0.631.

In the first year, the asset’s evaluation amount is:

JPY 41,980,000 × 0.815 = JPY 34,213,700.

The next year, its evaluation amount is:

JPY 34,213,700 × 0.631 = JPY 21,588,844.70