Calculation of Tax Book Values 
Use
The report calculates each asset’s tax book value as of January 1, the last day of the tax year. Broadly speaking, the tax book value is last year’s tax book value minus depreciation and additional depreciation.
Features
Starting Tax Book Value
The Property Tax Report reads last year’s tax book value from last year’s property tax declaration. This forms the starting point for calculating this year’s tax book value. Note that if you have posted a manual adjustment to the starting tax book value, the report changes the starting tax book value accordingly (see Changes to Last Year’s Tax Book Values and Evaluation Amounts).
Depreciation
When the report has determined each asset’s starting tax book value, it depreciates the asset at the rate stipulated by the tax law. The rates depend on the length of the asset’s useful life, for example:
|
Useful Life (Years) |
Depreciation Rate |
|
2 |
0.684 |
|
3 |
0.658 |
|
4 |
0.438 |
|
5 |
0.369 |
|
6 |
0.319 |
The rates are fixed and do not change from year to year.
The report then applies any additional depreciation, if appropriate (see Preparation of Declarations with Additional Depreciation). The tax book value is therefore last year’s tax book value minus depreciation (and additional depreciation, if applicable). The formula is as follows:
Starting tax book value – {Starting tax book value × [Depreciation 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 book value below the statutory minimum (see Minimum Tax book values).
Assets in Their First Year
For assets in their first year, the same procedure applies, with one or two exceptions:
· The starting point for calculating an asset’s tax book value is its acquisition and production costs (APC), excluding any investment support or special depreciation.
· The report calculates the depreciation only for the appropriate number of months, from the depreciation start date through December 31.
If you post an asset partway through a month, even on the last day, the report counts it as a whole month. If you post an asset on 1 January – that is, on the tax declaration date – the report calculates one month’s depreciation.
The formula is as follows:
*The expression in the square brackets is rounded to the nearest three decimal places.
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 5,600,000. It has an expected useful life of four years, which means that the depreciation rate is 0.438. In the first year’s tax declaration, you can only depreciate the asset for 10 months, since you bought it in March.
Let us consider what the asset’s tax book value in the first declaration would be with and without special deprecation. First, assume that there is no additional depreciation. The asset’s tax book value in the first year’s declaration would be JPY 3,556,000:
*Rounded to the nearest three decimal places
Now assume that the asset is subject to additional depreciation at 57%. In that case, the asset’s tax book value would be JPY 2,391,200:
*This figure, 0.57305, is rounded to the nearest three decimal places to give 0.573.