Depreciation in seasonal activities

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When using fixed assets only for a certain part of the year, the entrepreneur may make depreciation write-offs only in the period when he actually uses the machine. Seasonal fixed assets cannot be depreciated for the remainder of the year.

The need to suspend depreciation for the period when the fixed asset is not used in the enterprise results directly from Art. 22 h of paragraph 1. 1 point 3 of the PIT Act. It contains a provision that depreciation write-offs on seasonally used fixed assets and intangible assets are made during the period of their use.

Importantly, in the above-mentioned the provision also includes recommendations on how to calculate the amount of seasonal depreciation charges. The taxpayer has two methods to choose from - the annual amount of depreciation should be divided either by the number of months in the season of use, or by 12 months a year.

Although the regulations allow taxpayers full freedom in choosing the method, in practice the first solution is most often chosen. The argument behind this choice is that dividing by the number of months in a season is a more favorable option for the taxpayer. The depreciation charges will be higher and the depreciation period will be shorter.

It is worth finding out from an example. Assuming that the enterprise has a machine with an initial value of PLN 10,000, and the depreciation rate is 40%, in the case of year-round depreciation, write-offs of PLN 4,000 would have to be made. However, the equipment is only used in the summer season (June-August), i.e. for three months.

Therefore, if the annual amount of depreciation is divided by the number of months in a year when the fixed asset is used, the amount of the write-off will be approx. PLN 1,333 (PLN 4,000: 3 months). However, if the divisor is considered - in accordance with the second method - the number of months in a year, one write-off will amount to approximately PLN 333 (PLN 4,000: 12 months).

As you can see, when using the second method, the amount of the depreciation charge, which can be classified as costs in the months of using the machine, is much lower. However, as already mentioned, in practice the choice of the method of accounting for depreciation of seasonally used fixed assets depends entirely on the individual decision of the taxpayer.