Profit-seeking enterprise repair and maintenance expenses exceeding NT$80,000 that significantly increase the original asset value or have benefits that cannot be exhausted within 2 years should be treated as capital expenditure.

The National Taxation Bureau of Kaohsiung, Ministry of Finance explained that according to Articles 77 and 77-1 of the Regulations Governing Assessment of Profit-seeking Enterprise Income Tax, repair and maintenance expenses paid by profit-seeking enterprises for real estate, plant, and equipment used for business purposes, if their benefits cannot be exhausted within 2 years, should be listed as capital expenditure and added to the remaining actual cost of the original assets for calculation, except for expenses not exceeding NT$80,000 which may be listed as current year expenses. However, if the effective period of such benefits can be determined, they may be amortized evenly over the effective period. For repair and maintenance expenses of leased property, if the lease contract stipulates that the lessee enterprise is responsible for such expenses, they may be listed as expenses; if they have a deferred nature, they may be allocated and listed over the lease period according to their utility.

The Bureau provides the following example: Company A conducted comprehensive maintenance of factory equipment in January 2023, spending NT$5 million in total. When filing its 2023 profit-seeking enterprise income tax return, it listed the entire amount under business expenses. However, since the expenditure exceeded NT$80,000, significantly increased original asset value, and had benefits that could not be exhausted within 2 years, the NT$5 million should be treated as capital expenditure and included in the remaining actual cost of the original assets for calculation. Using the remaining useful years as the service life and calculating depreciation according to prescribed depreciation rates, the recalculated allowable depreciation expense for the current year was NT$1 million. Therefore, NT$4 million in repair and maintenance expenses reported for the current year was disallowed （NT$5 million - NT$1 million）, resulting in additional tax of NT$800,000（NT$4 million × 20% tax rate）.

The Bureau would like to remind profit-seeking enterprises that repair and maintenance expenses should be appropriately classified as current year expenses or capital expenditure based on their amount and service life to avoid adjustments and additional tax assessments by tax authorities for non-compliance. For inquiries, the public may call the toll-free service number 0800-000-321 or visit the Bureau’s website （https://www.ntbk.gov.tw）to make inquiries online using the National Tax Smart Assistant ＂National Tax Helper.＂

Provided by: Profit-seeking Enterprise Income Tax Division
Contact Person: Ms.  Li .    　 Phone:（07）725-6600 ext. 7150
Contributed by: Ms. Chiu . 　Phone:（07）725-6600 ext. 7158