Is it true that "only companies can use the declining-balance method"?

“The declining-balance method of depreciation can be used only by companies. Apparently sole proprietors can choose only the straight-line method.” Have you heard this kind of talk in the year you started your business?

Five tax terms, explained first

Here are plain-language explanations of the terms used in this article.

• Depreciation (genka shōkyaku) = the procedure of spreading the acquisition cost of machinery, buildings and similar assets over the years they can be used, and treating it as an expense year by year.
• Statutory depreciation method (hōtei shōkyaku hōhō) = the method set by law to be used when no notification has been filed.
• Straight-line method (teigaku-hō) = a calculation method that treats the same amount as an expense every year.
• Declining-balance method (teiritsu-hō) = a calculation method that treats a larger amount as an expense in the early years, and a smaller amount year by year.
• Notification (todokede) = informing the tax office in writing of which method you will use.

Conclusion

Our verdict is “TRUE, with conditions.” The point that an individual who files no notification uses the straight-line method is as the rumor says. However, by following the procedure of filing a notification, an individual can also choose the declining-balance method. What separates companies from individuals is not the range of methods they can use. It is the method used when no notification is filed. Below, we go through this in order.

How do the straight-line and declining-balance methods differ?

First, let us check the difference between the two methods. The National Tax Agency (NTA) explains it as follows.

償却費の額が原則として毎年同額となる。償却費の額は初めの年ほど多く、年とともに減少する。

Reference translation (unofficial): The amount of depreciation is, in principle, the same every year. The amount of depreciation is larger in the early years and decreases over the years.

(NTA Tax Answer, "No.2106 Depreciation by the straight-line method and the declining-balance method"; excerpt from the original NTA page in Japanese)

In plain terms: the straight-line method treats roughly the same amount as an expense every year. The declining-balance method treats a larger amount in the early years, and the amount decreases over the years^［1］.

Next, let us see who decides which method is used. Article 31, paragraph 1 of the Corporation Tax Act provides as follows.

内国法人の各事業年度終了の時において有する減価償却資産につきその償却費として第二十二条第三項（各事業年度の所得の金額の計算の通則）の規定により当該事業年度の所得の金額の計算上損金の額に算入する金額は、その内国法人が当該事業年度においてその償却費として損金経理をした金額（以下この条において「損金経理額」という。）のうち、その取得をした日及びその種類の区分に応じ、償却費が毎年同一となる償却の方法、償却費が毎年一定の割合で逓減する償却の方法その他の政令で定める償却の方法の中からその内国法人が当該資産について選定した償却の方法（償却の方法を選定しなかつた場合には、償却の方法のうち政令で定める方法）に基づき政令で定めるところにより計算した金額（次項において「償却限度額」という。）に達するまでの金額とする。

Reference translation (unofficial): The amount to be included in deductible expenses, under the provisions of Article 22, paragraph 3 (general rules for calculating the amount of income for each business year), in calculating the amount of income for a business year, as depreciation of depreciable assets held by a domestic corporation at the end of each business year, is the amount, out of the amount that the domestic corporation has recorded as an expense for that depreciation in its accounts for that business year (referred to in this Article as the “amount recorded as an expense”), up to the amount calculated as prescribed by Cabinet Order (referred to in the next paragraph as the “depreciation limit”), based on the depreciation method that the domestic corporation has selected for that asset, according to the date of acquisition and the category of its type, from among a depreciation method under which the depreciation is the same every year, a depreciation method under which the depreciation decreases at a fixed rate every year, and other depreciation methods prescribed by Cabinet Order (or, where no depreciation method has been selected, the depreciation method prescribed by Cabinet Order).

(Corporation Tax Act, Article 31, paragraph 1; original in Japanese)

In plain terms: what can be treated as an expense is the amount calculated with the selected method, up to that amount. The provision describes the methods as “a depreciation method under which the depreciation is the same every year” and “a depreciation method under which the depreciation decreases at a fixed rate every year.” Both a method that gives the same amount every year and one that does not are provided at the level of the Act itself^［2］.

For individuals, the wording is the same. Article 49, paragraph 1 of the Income Tax Act provides as follows.

居住者のその年十二月三十一日において有する減価償却資産につきその償却費として第三十七条（必要経費）の規定によりその者の不動産所得の金額、事業所得の金額、山林所得の金額又は雑所得の金額の計算上必要経費に算入する金額は、その取得をした日及びその種類の区分に応じ、償却費が毎年同一となる償却の方法、償却費が毎年一定の割合で逓減する償却の方法その他の政令で定める償却の方法の中からその者が当該資産について選定した償却の方法（償却の方法を選定しなかつた場合には、償却の方法のうち政令で定める方法）に基づき政令で定めるところにより計算した金額とする。

Reference translation (unofficial): The amount to be included in necessary expenses, under the provisions of Article 37 (necessary expenses), in calculating the amount of real estate income, business income, timber income or miscellaneous income of a resident, as depreciation of depreciable assets held by the resident on December 31 of that year, is the amount calculated as prescribed by Cabinet Order, based on the depreciation method that the resident has selected for that asset, according to the date of acquisition and the category of its type, from among a depreciation method under which the depreciation is the same every year, a depreciation method under which the depreciation decreases at a fixed rate every year, and other depreciation methods prescribed by Cabinet Order (or, where no depreciation method has been selected, the depreciation method prescribed by Cabinet Order).

(Income Tax Act, Article 49, paragraph 1; original in Japanese)

In plain terms: individuals, too, are written as choosing from the same two methods^［3］. At the level of the Acts, there is no difference between individuals and companies in the methods they can use.

The method used when no notification is filed is different

So what differs between companies and individuals? It is the method used when no notification is filed. The laws set this as the statutory depreciation method. First, companies. Article 53 of the Order for Enforcement of the Corporation Tax Act provides as follows.

法第三十一条第一項（減価償却資産の償却費の計算及びその償却の方法）に規定する償却の方法を選定しなかつた場合における政令で定める方法は、次の各号に掲げる資産の区分に応じ当該各号に定める方法とする。

Reference translation (unofficial): The method prescribed by Cabinet Order for the case where the depreciation method prescribed in Article 31, paragraph 1 of the Act (calculation of depreciation of depreciable assets and the depreciation method) has not been selected is the method specified in each of the following items, according to the category of assets listed in that item.

(Order for Enforcement of the Corporation Tax Act, Article 53, paragraph 1; original in Japanese)

Item 2(a) of this Article specifies the declining-balance method for assets such as machinery and equipment, vehicles, and tools, furniture and fixtures (Order for Enforcement of the Corporation Tax Act, Article 48-2, paragraph 1, item 2), and for building fixtures and structures acquired on or before March 31, 2016 (Heisei 28) (item 1(a) of the same paragraph)^{［4］［10］}.

Now individuals. Article 125 of the Order for Enforcement of the Income Tax Act provides as follows.

法第四十九条第一項（減価償却資産の償却費の計算及びその償却の方法）に規定する償却の方法を選定しなかつた場合における政令で定める方法は、次の各号に掲げる資産の区分に応じ当該各号に定める方法とする。

Reference translation (unofficial): The method prescribed by Cabinet Order for the case where the depreciation method prescribed in Article 49, paragraph 1 of the Act (calculation of depreciation of depreciable assets and the depreciation method) has not been selected is the method specified in each of the following items, according to the category of assets listed in that item.

(Order for Enforcement of the Income Tax Act, Article 125, paragraph 1; original in Japanese)

Item 2(a) of this Article specifies the straight-line method for the same assets (Order for Enforcement of the Income Tax Act, Article 120-2, paragraph 1, item 1(a) and item 2)^{［5］［8］}.

In other words, even if you buy the same machine, a company that files no notification uses the declining-balance method, and an individual uses the straight-line method. This is what lies behind the saying “companies use the declining-balance method; individuals cannot.” In its explanation for individuals, the NTA writes as follows.

この届出がない場合には、法定の償却方法で計算することになります。法定の償却方法は一般的には旧定額法または定額法です。

Reference translation (unofficial): If this notification is not filed, the calculation is made with the statutory depreciation method. The statutory depreciation method is generally the old straight-line method or the straight-line method.

(NTA Tax Answer, "No.2100 Overview of depreciation"; excerpt from the original NTA page in Japanese)

Its explanation for companies says the following.

したがって、例えば、機械および装置の法定償却方法は定率法ですので、定額法の選定を希望される場合は、「減価償却資産の償却方法の届出書」を提出する必要があります。

Reference translation (unofficial): Therefore, for example, since the statutory depreciation method for machinery and equipment is the declining-balance method, if you wish to select the straight-line method, you need to submit the “Notification of the Depreciation Method for Depreciable Assets.”

(NTA Tax Answer, "No.5409 Procedure for selecting the depreciation method for depreciable assets"; excerpt from the original NTA page in Japanese)

In plain terms: the statutory depreciation method for machinery and equipment is the declining-balance method, so a company that wants the straight-line method must file a notification^［7］. Conversely, an individual who files nothing uses the straight-line method. So when an individual wants to use the declining-balance method, they file a notification.

Individuals can also choose the declining-balance method by filing a notification

The methods an individual can choose are set out in Article 120-2, paragraph 1 of the Order for Enforcement of the Income Tax Act. Item 2 lists the following two methods for assets such as machinery and equipment, vehicles, and tools, furniture and fixtures.

第六条第三号から第七号までに掲げる減価償却資産（次号及び第六号に掲げるものを除く。）　次に掲げる方法　イ　定額法　ロ　定率法

Reference translation (unofficial): Depreciable assets listed in Article 6, items 3 to 7 (excluding those listed in the next item and item 6): the following methods: (a) the straight-line method; (b) the declining-balance method.

(Order for Enforcement of the Income Tax Act, Article 120-2, paragraph 1, item 2; original in Japanese)

In plain terms: for machinery and equipment, vehicles, tools, furniture and fixtures, and similar assets, individuals can also choose either the straight-line method or the declining-balance method^［8］. “(a)” (i in the Japanese original) is the straight-line method, and “(b)” (ro) is the declining-balance method. The selected method is used after notifying the district director of the tax office in writing.

Note that this article assumes assets acquired on or after April 1, 2007 (Heisei 19). For assets acquired before that, there are separate methods: the old straight-line method and the old declining-balance method.

Some assets cannot use the declining-balance method

There is an exception to everything above: buildings, and building fixtures and structures. Article 120-2, paragraph 1, item 1 of the Order for Enforcement of the Income Tax Act divides the range of choices for this category as follows.

平成二十八年三月三十一日以前に取得された減価償却資産（建物を除く。）　次に掲げる方法　（１）　定額法（…）　（２）　定率法

Reference translation (unofficial): Depreciable assets acquired on or before March 31, 2016 (excluding buildings): the following methods: (1) the straight-line method (…); (2) the declining-balance method.

(Order for Enforcement of the Income Tax Act, Article 120-2, paragraph 1, item 1(a); original in Japanese)

It then sets out the treatment of assets that do not fall under this “(a)” as follows.

イに掲げる減価償却資産以外の減価償却資産　定額法

Reference translation (unofficial): Depreciable assets other than those listed in (a): the straight-line method.

(Order for Enforcement of the Income Tax Act, Article 120-2, paragraph 1, item 1(b); original in Japanese)

In plain terms: item 1 is the category that groups buildings, building fixtures and structures together. Within it, “(a)” refers to assets other than buildings acquired on or before March 31, 2016 (Heisei 28), that is, building fixtures and structures. Everything else, that is, buildings, and building fixtures and structures acquired on or after April 1, 2016, falls under “(b)” and can use only the straight-line method^［8］.

The same applies to companies. Article 48-2, paragraph 1, item 1 of the Order for Enforcement of the Corporation Tax Act uses the same division.

イに掲げる減価償却資産以外の減価償却資産　定額法

Reference translation (unofficial): Depreciable assets other than those listed in (a): the straight-line method.

(Order for Enforcement of the Corporation Tax Act, Article 48-2, paragraph 1, item 1(b); original in Japanese)

In other words, for buildings, and for building fixtures and structures acquired on or after April 1, 2016, even a company cannot choose the declining-balance method^［10］. Here, the saying “the declining-balance method belongs to companies” does not hold either.

The NTA, too, writes as follows in its explanation for individuals.

さらに、平成10年4月1日以後に取得した建物の償却方法は、旧定額法または定額法のみとなり、平成28年4月1日以後に取得した建物附属設備および構築物の償却方法は定額法となります。

Reference translation (unofficial): Furthermore, the depreciation method for buildings acquired on or after April 1, 1998 (Heisei 10) is limited to the old straight-line method or the straight-line method, and the depreciation method for building fixtures and structures acquired on or after April 1, 2016 (Heisei 28) is the straight-line method.

(NTA Tax Answer, "No.2100 Overview of depreciation"; excerpt from the original NTA page in Japanese)

In plain terms: buildings acquired on or after April 1, 1998 (Heisei 10) cannot use the declining-balance method. Depending on when they were acquired, they use the old straight-line method or the straight-line method^［6］. Building fixtures and structures acquired on or after April 1, 2016 can use only the straight-line method.

Deadlines for the notification, and the procedure for changing methods

By when must the notification be filed? For individuals, the deadline is set out in Article 123, paragraph 2 of the Order for Enforcement of the Income Tax Act.

居住者は、次の各号に掲げる者の区分に応じ当該各号に定める日の属する年分の所得税に係る確定申告期限までに、その有する減価償却資産と同一の区分（前項に規定する区分をいい、二以上の事業所又は船舶を有する居住者で事業所又は船舶ごとに償却の方法を選定しようとする場合にあつては、事業所又は船舶ごとの当該区分をいう。）に属する減価償却資産につき、当該区分ごとに、第百二十条第一項又は第百二十条の二第一項に規定する償却の方法のうちそのよるべき方法を書面により納税地の所轄税務署長に届け出なければならない。

Reference translation (unofficial): A resident must, by the deadline for the final tax return for income tax for the year that includes the date specified in each of the following items according to the category of person listed in that item, notify in writing the district director of the tax office having jurisdiction over the place for tax payment of the method to be used, from among the depreciation methods prescribed in Article 120, paragraph 1 or Article 120-2, paragraph 1, for each category, for depreciable assets belonging to the same category as the depreciable assets the resident holds (meaning the category prescribed in the preceding paragraph; where a resident who has two or more business offices or vessels intends to select a depreciation method for each business office or vessel, meaning that category for each business office or vessel).

(Order for Enforcement of the Income Tax Act, Article 123, paragraph 2; original in Japanese)

In plain terms: an individual notifies in writing by the deadline for the final tax return for the year that includes the day the business started, or the day an asset in a category not held until then was acquired^［9］. The NTA also explains it as follows.

新たに業務を始めた場合には、減価償却の方法を選定してその翌年の3月15日までに所轄の税務署長に届け出なければなりません。

Reference translation (unofficial): If you have newly started a business, you must select the depreciation method and notify the district director of the tax office having jurisdiction by March 15 of the following year.

(NTA Tax Answer, "No.2100 Overview of depreciation"; excerpt from the original NTA page in Japanese)

In plain terms: for the year in which the business started, the deadline is March 15 of the following year^［6］. When an asset in that category is acquired for the first time, the deadline is likewise the deadline for the final tax return for that year.

However, this deadline applies when you did not hold assets in that category until then. If you already hold assets in the same category and are depreciating them with the straight-line method without having filed a notification, then even if you later buy more assets in the same category, you cannot switch to the declining-balance method with a notification filed by the deadline for the final tax return. To change, you file an application for approval of a change under Article 124 of the Order for Enforcement of the Income Tax Act by March 15 of the year in which you want to change^［12］.

For companies, the deadline is set out in Article 51, paragraph 2 of the Order for Enforcement of the Corporation Tax Act.

その有する減価償却資産と同一の資産区分に属する減価償却資産につき、当該資産区分ごとに、第四十八条第一項又は第四十八条の二第一項に規定する償却の方法のうちそのよるべき方法を書面により納税地の所轄税務署長に届け出なければならない。

Reference translation (unofficial): … must notify in writing the district director of the tax office having jurisdiction over the place for tax payment of the method to be used, from among the depreciation methods prescribed in Article 48, paragraph 1 or Article 48-2, paragraph 1, for each asset category, for depreciable assets belonging to the same asset category as the depreciable assets it holds.

(Order for Enforcement of the Corporation Tax Act, Article 51, paragraph 2; original in Japanese)

In plain terms: a company notifies in writing by the deadline for the final tax return for the business year that includes the day of its incorporation, or the day an asset in an asset category not held until then was acquired^［11］. The NTA’s explanation is as follows.

法人は、平成19年4月1日以後に取得をされた減価償却資産の償却方法について、平成19年3月31日以前に取得をされたものと区分した上で、資産の種類ごとや事務所または船舶ごとに選定し、確定申告書の提出期限までに、「減価償却資産の償却方法の届出書」を税務署長に届け出ることとされています。

Reference translation (unofficial): A company is to select the depreciation method for depreciable assets acquired on or after April 1, 2007 (Heisei 19), separately from those acquired on or before March 31, 2007, for each type of asset and for each office or vessel, and to file the “Notification of the Depreciation Method for Depreciable Assets” with the district director of the tax office by the deadline for submitting the final tax return.

(NTA Tax Answer, "No.5409 Procedure for selecting the depreciation method for depreciable assets"; excerpt from the original NTA page in Japanese)

In plain terms: a company files the notification by the deadline for submitting the final tax return^［7］. If it already holds assets in the same asset category, it cannot reselect the method with that notification, and approval of a change is required^{［11］［13］}.

Next, changing the method later. For individuals, this is set out in Article 124, paragraph 2 of the Order for Enforcement of the Income Tax Act.

その新たな償却の方法を採用しようとする年の三月十五日までに、その旨、変更しようとする理由その他財務省令で定める事項を記載した申請書を納税地の所轄税務署長に提出しなければならない。

Reference translation (unofficial): … must, by March 15 of the year in which the new depreciation method is to be adopted, submit to the district director of the tax office having jurisdiction over the place for tax payment an application stating that fact, the reason for the change, and other matters prescribed by Ministry of Finance Ordinance.

(Order for Enforcement of the Income Tax Act, Article 124, paragraph 2; original in Japanese)

In plain terms: an individual submits the application by March 15 of the year in which they want to change^［12］. For companies, the deadline is in Article 52, paragraph 2 of the Order for Enforcement of the Corporation Tax Act.

その新たな償却の方法を採用しようとする事業年度開始の日の前日までに、その旨、変更しようとする理由その他財務省令で定める事項を記載した申請書を納税地の所轄税務署長に提出しなければならない。

Reference translation (unofficial): … must, by the day before the first day of the business year in which the new depreciation method is to be adopted, submit to the district director of the tax office having jurisdiction over the place for tax payment an application stating that fact, the reason for the change, and other matters prescribed by Ministry of Finance Ordinance.

(Order for Enforcement of the Corporation Tax Act, Article 52, paragraph 2; original in Japanese)

In plain terms: for a company, the deadline is the day before the first day of the business year in which it wants to use the new method^［13］. The NTA explains the change procedure as follows.

減価償却資産の償却方法を変更しようとするときは、原則として、新たな償却方法を採用しようとする事業年度開始の日の前日までに償却方法を変更しようとする理由などを記載した「減価償却資産の償却方法の変更承認申請書」を所轄税務署長に提出して、所轄税務署長の承認を受けなければなりません。

Reference translation (unofficial): When you intend to change the depreciation method for depreciable assets, in principle, you must submit an “Application for Approval of a Change in the Depreciation Method for Depreciable Assets,” stating the reason for the change and other matters, to the district director of the tax office having jurisdiction by the day before the first day of the business year in which the new depreciation method is to be adopted, and obtain the approval of that district director.

(NTA Tax Answer, "No.5407 Procedure for changing the depreciation method for depreciable assets"; excerpt from the original NTA page in Japanese)

In plain terms: to change, you submit an application and obtain the approval of the district director of the tax office^［14］. The NTA also explains when approval is not given.

その法人が現によっている償却の方法を採用してから3年を経過していない場合は、その変更が合併や分割に伴うものである等特別な理由があるときを除き、相当の期間を経過していないときに該当します。

Reference translation (unofficial): If three years have not passed since the company adopted the depreciation method it currently uses, this falls under the case where a reasonable period has not passed, except where there is a special reason, such as the change accompanying a merger or a company split.

(NTA Tax Answer, "No.5407 Procedure for changing the depreciation method for depreciable assets"; excerpt from the original NTA page in Japanese)

In plain terms: if three years have not passed since a company adopted its current method, the change is not approved unless there is a special reason, such as one accompanying a merger or a company split^［14］.

What to do

Note that a “category” here means a type of asset as divided in the tables of the Ministry of Finance Ordinance, such as vehicles and transport equipment, or tools, furniture and fixtures. The NTA also explains that the method “is selected for each type set out in the tables of the Ministry of Finance Ordinance for depreciable assets”^［6］. For example, if a person who owns a computer (tools, furniture and fixtures) buys a car (vehicles and transport equipment), the car is in a different category, so a new notification of selection can be filed for the car.

What differs between companies and individuals is only the method used when no notification is filed. An individual who wants to use the declining-balance method can choose it by filing a notification when they first hold an asset in that category. Conversely, a company that wants to use the straight-line method can also choose it by filing a notification. If you already hold assets in the same category, you file an application for approval of a change.

Summary

“Only companies can use the declining-balance method” is TRUE, with conditions. An individual who files no notification uses the straight-line method. To that extent, the rumor is right. By filing a notification, an individual can also choose the declining-balance method.

• The Acts use the words “the depreciation method selected” for both individuals and companies［2］［3］.
• What differs is the method used when no notification is filed: the declining-balance method for companies, and the straight-line method for individuals［4］［5］.
• Individuals can also choose the declining-balance method by filing a notification［8］［9］.
• Buildings, and building fixtures and structures acquired on or after April 1, 2016, use only the straight-line method, for both companies and individuals［10］［6］.
• The notification is due by the deadline for the final tax return for the year in which an asset in that category is first acquired. If you already hold assets in the same category, an application for approval of a change is required［9］［11］［12］［13］.
• Changing the method later requires the approval of the district director of the tax office［12］［13］［14］.

Even if you buy the same machine, with no notification a company uses the declining-balance method and an individual uses the straight-line method. Looking only at this, it seems that only companies can use the declining-balance method. However, the method can be chosen. An individual who wants to use the declining-balance method can choose it by notifying the tax office by the deadline for the final tax return for the year in which an asset in that category is first acquired.

Sources

• ［1］No.2106 Depreciation by the straight-line method and the declining-balance method — NTA Tax Answer (Japanese)　Checked: 2026-10-17
• ［2］Corporation Tax Act, Article 31 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［3］Income Tax Act, Article 49 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［4］Order for Enforcement of the Corporation Tax Act, Article 53 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［5］Order for Enforcement of the Income Tax Act, Article 125 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［6］No.2100 Overview of depreciation — NTA Tax Answer (Japanese)　Checked: 2026-10-17
• ［7］No.5409 Procedure for selecting the depreciation method for depreciable assets — NTA Tax Answer (Japanese)　Checked: 2026-10-17
• ［8］Order for Enforcement of the Income Tax Act, Article 120-2 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［9］Order for Enforcement of the Income Tax Act, Article 123 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［10］Order for Enforcement of the Corporation Tax Act, Article 48-2 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［11］Order for Enforcement of the Corporation Tax Act, Article 51 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［12］Order for Enforcement of the Income Tax Act, Article 124 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［13］Order for Enforcement of the Corporation Tax Act, Article 52 (e-Gov Law Search, Japanese)　Checked: 2026-10-17
• ［14］No.5407 Procedure for changing the depreciation method for depreciable assets — NTA Tax Answer (Japanese)　Checked: 2026-10-17

Note: This article is based on laws and official information as of October 17, 2026. It is a translation of the Japanese original; if the two differ, the Japanese version prevails. Quotations from laws and official sources are given in the original Japanese, followed by unofficial reference translations. Sources are based on laws (e-Gov) and official materials of the NTA, all in Japanese. If a correction is needed after publication, a correction record will be added at the end of this article (Correction policy).