Individual depreciation rate for passenger cars and premium rates

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The provisions of the Personal Income Tax Act make it possible to apply an individually defined depreciation rate for passenger cars. However, not everyone can apply it.

Individual depreciation rate for investments in foreign fixed assets

Investments in foreign fixed assets consist in the improvement of fixed assets that a given enterprise uses in its operations, but which are not owned by it. These funds can be transferred for use on the basis of a lease, rental or rental agreement.

If an investment in a foreign fixed asset causes the expenses for its improvement to account for at least 20% of the initial value of this fixed asset, the provisions allow for the application of an individual depreciation rate to that fixed asset, which is the basis for including the given investment in the company's costs (Art. 22j (1-2) of the Personal Income Tax Act, hereinafter referred to as the CIT Act).

The condition is that the improved fixed asset is:

  • first entered in the Register of Fixed Assets of a given entrepreneur
  • depreciated for at least 30 months - applies to means of transport, including passenger cars (excluding sea rolling stock)

Fixed assets used with an individual depreciation rate

An individual rate can also be applied to used fixed assets. Such can be considered those where the entrepreneur proves that before their purchase they were used for a period of at least 6 months. The regulations do not specify exactly how to prove prior use. It is at the discretion of the taxpayer.

The condition for applying the individual depreciation rate for the used fixed asset is, similarly to the improvement:

  • entering it for the first time in the Register of Fixed Assets of a given entrepreneur
  • depreciation for at least 30 months - applies to means of transport (excluding sea rolling stock), including passenger cars.

Thus, the highest individual depreciation rate for investments in third-party means of transport (passenger cars or trucks) or for purchased used cars is 40% (coefficient 2.0).

Means of transport used more intensively

Another privilege provided by the provisions of the PIT Act is the possibility of applying an increased depreciation rate. This applies to means of transport, excluding sea rolling stock, which are used more intensively considering average conditions or which require particular technical efficiency. However, this nature has not been specified in more detail in tax regulations.

The Act makes it possible to apply an increase factor not higher, however, than 1.4 (Article 22i (2) (2) of the CIT Act). This means that if the depreciation rates given in the list are increased, the highest factor that can be used is 1.4. The 7th group of KŚT was excluded from the possibility of applying a higher coefficient, e.g. 2.0, which can be used in the case of some machines and devices (Article 22i (2) (3) of the CIT Act).

One selected factor should be used when increasing the depreciation of the asset. This means that you should not change the value of the coefficient once assigned to the item.

Note: do not confuse the increased depreciation in the described case with the commonly understood degressive method! This is because it is accelerated linear depreciation.

Due to the lack of clarification of the concept of "more intensive" and "requiring particular technical efficiency", the use of increased depreciation in the case of means of transport is risky as it may be questioned by the tax authorities. Therefore, one should consider the possibility of proving greater than average car operation. There is no doubt about the application of the increased depreciation rate for three-shift work where each shift uses the same fixed asset. On the other hand, whether the use of a car to deliver pizzas from 10 am to 11 pm can be considered an increased intensity of use - this has to be decided by the taxpayer himself. The entrepreneur must also have evidence that the fixed asset is, in fact, intensively exploited.