The tax authority outlined how businesses can claim losses on fixed assets damaged by floods.
Taiwan’s National Taxation Bureau of the Southern Area outlined rules for claiming losses on damaged assets.
Southern Taiwan recently faced torrential rains, causing flooding in low-lying areas. The National Taxation Bureau of the Southern Area, Ministry of Finance, said some profit-seeking enterprises suffered damage that led to the premature destruction or scrapping of machinery and equipment in their factories, even though these assets had not yet reached their prescribed service life.
The Bureau stated that, under Article 57 of the Income Tax Act, enterprises may claim the undepreciated book value of such fixed assets as a loss for the year, provided they submit the proper supporting documents.
According to Subparagraph 10, Article 95 of the Regulations Governing Assessment of Profit-seeking Enterprise Income Tax, acceptable documentation for scrapped fixed assets includes:
- An audit report from a certified public accountant (CPA) regarding disaster losses, or an annual income tax return audited and certified by a CPA, accompanied by supporting documents such as photos taken before and after scrapping, receipts for the sale of scrap materials, and records of the disposal process; or
- Documents issued by the competent authority confirming the supervised destruction of the assets, detailing the names, quantities, and values of the destroyed items.
If such documentation cannot be obtained, the enterprise must seek prior approval from the tax authority before scrapping the assets. In such cases, the undepreciated book value may then be recognised as a loss for the fiscal year.
The Bureau provided an example: In its 2022 annual income tax return, Company A reported a fixed asset disposal loss exceeding TWD 10 million for factory buildings and machinery. The loss resulted from relocating its business premises, which required dismantling and disposing of factory buildings and machinery that had not yet reached their prescribed service life. However, because Company A neither obtained prior approval from the tax authority nor provided supporting documents such as before-and-after photos, disposal records, or scrap sale receipts, the claimed loss was disallowed.
The Bureau reminded enterprises that if fixed assets are destroyed before reaching their prescribed service life—as specified in the Table of Service Life of Fixed Assets—due to specific incidents, proper documentation must be kept. Any income derived from the disposal of such materials must also be reported to avoid penalties for omission or underreporting.
The announcement was issued on 10 November 2025.
