One-time depreciation - who can use it?
The Act of July 7, 2017 Amending the Act on Personal Income Tax and the Act on Corporate Income Tax (Journal of Laws of 2017, item 1448) introduced the right for all entrepreneurs to an annual one-off settlement of outlays for fixed assets up to PLN 100,000 with a minimum outlay of PLN 10,000. Before August 12, 2017, in which the amendment entered into force, one-time depreciation and the possibility of including it in the so-called tax costs were due only to those taxpayers who were just starting their business activities or whose gross sales revenues in the previous tax year did not exceed the PLN equivalent of EUR 1,200,000.
Under the current legal framework, all entrepreneurs, regardless of the form in which they conduct their business activity, can take advantage of one-off depreciation, provided that certain conditions are met.
Moreover, this instrument is also not covered by the de minimis aid regime, so it can also be used by entrepreneurs who have received in recent years, for example, funding from the European Union, exhausting the limit of de minimis aid, and by those who belong to the group of entrepreneurs. excluded from this type of public support.
One-off depreciation - Which fixed assets can be depreciated?
As the purpose of the amendment in question was to create a mechanism enabling the stimulation of investments made by entrepreneurs, the new variant of one-off depreciation applies only to investments in brand new fixed assets included in groups 3-6 and 8 of the Fixed Assets Classification. These groups include boilers and power machines, machines, devices and apparatus for general and specialized use, technical devices, tools, instruments, movables and equipment, not elsewhere classified.
It should be emphasized that the fixed assets from the above-mentioned group must be brand new, which means that the one-off depreciation charge will not apply to used fixed assets or those manufactured by the taxpayer on his own.
One-time depreciation - amount limit
Every year, the entrepreneur may make one-off depreciation write-offs from the initial value of brand new fixed assets purchased in groups 3-6 and 8 of the Classification in the tax year in which these assets were entered into the register of fixed assets and intangible assets, up to the amount not exceeding in the tax year the amount of PLN 100,000. The amount of PLN 100,000 includes the sum of depreciation charges and payments towards the acquisition of a fixed asset, classified as tax deductible costs.
In the case of a company that is not a legal person, the amount of the depreciation write-off limit refers to the total value of the write-offs attributable to the partners of this company.
If the taxpayer incurs an investment expenditure in excess of PLN 100,000, he will make a one-off write-off to this amount in the tax year, and the remaining surplus will be amortized according to general rules in the following tax years, the sum of the depreciation write-offs and payments towards the acquisition of a fixed asset included in tax deductible costs may not exceed the initial value of these fixed assets.
Minimum investment expenditure
An additional condition for taking advantage of the new regulations is that the investments made by taxpayers in new fixed assets in a given year amount to at least PLN 10,000.
In the case of at least two fixed assets purchased in the tax year, their total tax value should be at least PLN 10,000, and the initial value of each of them should exceed PLN 3,500.
This means that the taxpayer may count as tax deductible costs the expenditure on the purchase of one or more fixed assets in a given year, provided that they spent at least PLN 10,000 on their acquisition, and the initial value of each of them was more than PLN 3,500.
At the same time, if the taxpayer starts to depreciate a fixed asset with a value below PLN 10,000 and above PLN 3,500 and then includes its value within the limit of PLN 10,000, the depreciation write-offs made so far remain in the costs, and taking into account the one-off write-off in the amount of PLN 100,000 is subject to the non-depreciated value of this asset.
Payments for the purchase of a fixed asset, the delivery of which will be made in the following reporting periods
The discussed solution also allows taxpayers to count directly as tax deductible costs the payments made (e.g. advances) for the acquisition of a fixed asset, the delivery of which will be made in the following reporting periods, i.e. in the next month, quarter or year. In a situation where the delivery is not made, e.g. as a result of withdrawal from the contract, the taxpayer will be obliged to adjust the tax deductible costs on general terms.
When will the taxpayer be required to increase revenues with a contribution towards the purchase of a fixed asset?
Both before and after the acquisition of a fixed asset, the payment of which has been included by the taxpayer as tax deductible costs, there may be situations in which the taxpayer will be obliged to make adjustments to tax costs.
Prior to the acquisition of a fixed asset, such a necessity will occur when the taxpayer:
- liquidated business activity or
- changed the form of taxation to a flat-rate taxation specified in the Act of August 24, 2006 on tonnage tax or in the Act of July 6, 2016 on the activation of the shipbuilding industry and complementary industries.
After the acquisition of a fixed asset, the obligation to increase revenues by a contribution towards the acquisition of a fixed asset will arise when the taxpayer:
- did not make a one-off depreciation write-off from the fixed asset or
- he sold a fixed asset for a fee.
Increase of revenues by payment towards the acquisition of a fixed asset should then take place on the last day of business before its liquidation, on the last day of business before the change of the form of taxation, on the day on which the taxpayer made the first write-off or on the day of sale of the fixed asset for consideration.
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Choosing the depreciation base
Considering that in the applicable regulations there is already a solution regarding the possibility of a one-off depreciation write-off up to the amount of EUR 50,000 (addressed to small taxpayers and start-ups), in the case of purchasing a fixed asset entitling to a one-off depreciation write-off in the amount of EUR 50,000 euro, and the proposed in the amount of PLN 100,000, write-off in relation to this
Do the regulations in question apply only to fixed assets acquired after their entry into force?
The discussed one-off depreciation mechanism also applies to fixed assets purchased from January 1, 2017 and payments made from that date for the acquisition of these assets.
Can a one-off depreciation be applied to fixed assets already partially depreciated?
The Director of the National Tax Information in the tax ruling of January 8, 2018, 0111-KDIB1-2.4010.406.2017.1.MM, stated that the taxpayer's position was correct, which indicated that Art. 16k paragraph. 14 of the CIT Act will apply both to funds that have been partially depreciated and to funds that have not yet started to be depreciated. The wording used in this recipe "From the initial value of the factory-acquired fixed assets" it will cover both fixed assets, the depreciation of which has not started yet, and fixed assets which have already been partially depreciated. Thus, there is no justification for separately classifying funds partially depreciated and one not depreciated in any part.
After making a one-off depreciation write-off in the amount of PLN 100,000, is the taxpayer entitled to make further depreciation write-offs from the remaining initial value of the fixed asset in the same tax year?
After making a one-off depreciation write-off in the amount of PLN 100,000, the taxpayer was not entitled to make further depreciation write-offs from the remaining initial value of the fixed asset in the same tax year. These write-offs (in accordance with Art.22k (1) or Art.22i of the Personal Income Tax Act) may be calculated only from the next tax year, as confirmed by the Director of the National Tax Information in an individual ruling of November 14, 2017 0115-KDIT3. 4011.281.2017.1.DR
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To sum up, every entrepreneur, not only a small or starting-up taxpayer, is now entitled to use the one-off depreciation write-off. This depreciation variant relates to the acquisition of brand new fixed assets from groups 3-6 and 8 of the Fixed Assets Classification. The limit of write-offs is PLN 100,000 in the tax year, with a minimum outlay of PLN 10,000 and the initial value of one fixed asset exceeding PLN 3,500.