Repair and Maintenance Expense Validity Period
Based on the regulation (*Note), repair and maintenance expense mean its validation is within 2 years. Any expenses exceeding this period must be classified as capital expenditures.
Below is an example to illustrate this.
Company A generates its primary revenue from branded clothing. In January 2023, it signed a three-year contract with a department store to establish a its shop. Under the agreement, Company A was responsible for setting up and decorating the shop’s counter. When filing its 2023 income tax return, Company A fully reported the NTD 9 million, spent on counter decoration as operating expenses. However, since the benefits from the decoration cannot be fully realized within two years, the NTD 9 million should be classified as a capital expenditure.
Given the three-year duration of the shop installation contract, the average annual decoration cost is recognized as NTD 3 million. After deducting the current year’s decoration cost, the additional taxable amount is NTD 1.2 million (calculated as NTD 6 million * 20%).
*Note: Article 77 Income Tax Assessment Guidelines for Profit-Profit Enterprises
……If the amount exceeds NTD 80,000 and is deferred, it should be amortized over the lease term based on performance.
