Amortization of computer programs - what rate and method?
A significant number of entrepreneurs use a computer in their business. However, many of these devices must have an appropriate computer program that facilitates running a business. It is classified as an intangible and legal asset. Is computer programs amortized? We answer below.
Division of computer programs
Due to the tax consequences, computer programs should be divided into:
system (operational) software,
application software in OEM or BOX version.
System programs are usually purchased with your computer. They are an indispensable element that enables its commissioning and operation.
In turn, programs in the OEM version are used on one computer. Licenses for such a program may not be resold or transferred to other devices. Purchasing the OEM version of the application increases the initial value of the computer.
Utility programs in the BOX version constitute an intangible asset and therefore constitute a separate asset and are subject to depreciation.
A computer program that is an intangible asset
In the light of the Act on Copyright and Related Rights, the subject of copyright is any manifestation of creative activity of an individual nature, established in any form, regardless of its value, purpose and manner of expression. According to this definition, computer programs may constitute copyrights, which are classified as intangible assets.
Usually, however, when buying a computer program, a taxpayer acquires a license to use the program. Therefore, there is no transfer of proprietary copyrights.
A computer program is an intangible asset that is amortized in a situation where:
Determining the initial value of a computer program
If the entrepreneur purchased a computer program by way of purchase, its initial value is the purchase price.
The purchase price is the amount due to the vendor increased by the costs related to the purchase accrued until the date of commissioning the program for use, less deductible VAT.
The costs that may increase the initial value of a computer program include, for example, the cost of loading, unloading, transport, insurance on the way, installation, program launch or the cost of implementing a computer program.
Amortization of computer programs - what rate and method of amortization
In a situation where the computer program is an intangible asset, it should be entered into the register of fixed assets and intangible assets. This should be done at the latest in the month of commissioning the computer program for use. Amortization of computer programs may start from the next month.
Computer programs may be amortized using the straight-line method for a period not shorter than 2 years, therefore the annual amortization rate may not be higher than 50%.
The depreciation of intangible assets, including the depreciation of computer programs, was excluded from the possibility of applying one-off depreciation under the de minimis aid.
However, if the value of the computer program does not exceed PLN 10,000, it is possible to apply a one-time depreciation write-off in the month when the computer program is commissioned for use or in the next month.
However, if the initial value of a computer program exceeds PLN 10,000, but the expected period of use of the program in the company is shorter than a year, it will not constitute an intangible and legal asset. In such a situation, the purchase of a computer program should be included directly in tax costs.