Donation of company assets at KPiR

Website

When the entrepreneur decides to donate the company's property, certain obligations arise on both sides - both on the side of the donor and the recipient.

Donation of company assets - donor duties

Each donor is obliged to provide a free benefit to the recipient person or institution. If the entrepreneur has assets that have not been fully depreciated, the owner of the business is forced to cease this activity from the month following the month of donation, and the last depreciation will become the cost in the said month of donation. Importantly, the donor (pursuant to Art. 11 (1) and Art. 14 of the PIT Act) does not receive income from this activity, and the donation cannot constitute a tax deductible cost. This is stated in Art. 23 sec. 1 point 11 of the PIT Act:

Art. 23 sec. 1 point 11NDonations and donations of any kind are not considered to be tax deductible costs, except that the cost of obtaining revenues is the production costs or the purchase price of food products referred to in article 1. 43 sec.1 point 16 of the Act on tax on goods and services, transferred to public benefit organizations within the meaning of the provisions of the Act on public benefit activities, intended solely for the purposes of charity activities carried out by these organizations.

 

Importantly, people running a business can deduct certain donations in their annual tax return. This is regulated by Art. 26 sec. 1 point 9 of the PIT Act:

 

Art. 26 sec. 1 point 9 The basis for calculating the tax, subject to article 22. 29-30c and art. 30E, is income determined in accordance with article 5. 9, art. 24 sec. 1, 2, 3b-3e, 4, 4a-4e, sec. 6 or article. 24b paragraph. 1 and 2, or article. 25, after deduction of the amounts of donations made for the purposes of:

a) specified in art. 4 of the Act on Public Benefit Activity, organizations referred to in art. 3 sec. 2 and 3 of this Act, or equivalent organizations specified in the provisions regulating public benefit activities in force in a Member State of the European Union other than the Republic of Poland or another country belonging to the European Economic Area, conducting public benefit activities in the sphere of public tasks, implementing these objectives, subject to paragraph 6e,

b) religious worship,

(c) blood donation carried out by honorary blood donors in accordance with Art. 6 of the Act of August 22, 1997 on the public blood service (Journal of Laws No. 106, item 681, as amended), in the amount of the cash equivalent for the donation of blood specified in the regulations issued on the basis of Art. 11 sec. 2 of this act

- in the amount of the donation made, but not more than the amount representing 6% of the income.

Donation of company property - responsibilities of the recipient

The most important thing is for the recipient to implement the donation in the register of fixed assets and clearly define their depreciation over time.

A fixed asset is an asset according to the PIT Act in the following cases:

  • forms a whole and is usable at the time of receipt,

  • is owned or jointly owned by the taxpayer,

  • will be used for more than a year,

  • will be used by the taxpayer for the purposes related to his business activity or given on the basis of a rental, lease or leasing agreement.

Establishing the initial value of the donation object

The value of the fixed asset in the case of a donation is determined on the basis of the market value at the date of purchase. A derogation is possible, as long as the value of the measure is specified in the contract as lower. A tax cost pursuant to Art. paragraph 1 point 45a lit. and there will be depreciation write-offs:

 

Art. 1 point 45a Depreciation write-offs from the initial value of fixed assets and intangible assets acquired free of charge are not considered to be tax deductible costs, except for those acquired by inheritance or donation, if: the acquisition does not constitute income from the free receipt of goods or rights or income on this account is exempt from income tax, or the acquisition constitutes income on which, pursuant to separate provisions, tax collection has been abandoned.

 

There are a few important issues to bear in mind when it comes to the correct settlement of the transaction of transferring company property. Because while the donation is tax neutral for the entrepreneur, this tax obligation arises for the recipient.