Purchasing used assets can save your tax. Before the details, I want to explain you the basic rules for depreciation.
There are two methods for deprecation.
1. Straight line method
Building, Equipment attached to the building
2. Fixed percentage method
Machinery, Furniture, Car, Office equipment
If you do not select, fixed percentage method will be applied to machinery, furniture, car and office equipment, but you can change to straight line method if you submit the application to change deprecation method to the tax office.
Useful life and deprecation are determined by the tax law.
How about the depreciation for used assets?
Case 1. Useful life of asset by law has not been expired
(Useful life for new assets – age of the used assets) + Age of the used assets x 20%
Case 2. Useful life of asset by law is expired.
Useful life for new asset x 20%
Useful life for new car : 6 years
Purchased 4 years ago by first owner
Purchased at 2,000,000 yen
Useful life is calculated as follow:
(6 years – 4 years) ＋ 4 years×20% =2.8 years → 2 years
Depreciation rate is 100% for the assets whose useful life is 2 years.
Depreciation in the first year
2,000,000 yen ×1.0 = 2,000,000 yen.
The company can recognize 100% depreciation and save tax.