Liquidation of the non-redeemed fixed asset and tax costs


Fixed assets are settled in tax costs through depreciation write-offs. It sometimes happens that an entrepreneur liquidates fixed assets before they are fully depreciated. The loss resulting from the liquidation of non-fully depreciated fixed assets may sometimes constitute a tax deductible cost. how should the liquidation of the fixed asset proceed? We answer.

Liquidation of a fixed asset constituting a tax deductible cost

When liquidating a fixed asset, it should be removed from the fixed assets register. The basis for making entries is issuing a proof "LT - Liquidation of a fixed asset”.

When a fixed asset is not fully depreciated at the time of its liquidation, depending on the reason, the unamortized part of the initial value may constitute tax deductible costs.

You can include here the liquidation of, among others due:

  • theft of a fixed asset - it should be remembered that the taxpayer should have appropriate documentation confirming the fact of theft and prove that the theft was not his fault; in the case of cars, there is an additional condition in the form of voluntary AC insurance;

  • damage to a fixed asset - if it was created through no fault of the taxpayer and the cost of its repair exceeds the market value (it should also be properly documented);

  • withdrawal from economic activity for private purposes and sale - if the sale of a fixed asset took place within 6 years from the withdrawal from activity, then the income obtained should be presented as company income, and the unamortized part will constitute the tax cost (income and cost are recognized on the date of sale the withdrawn fixed asset);

  • demolition of a fixed asset - if we decide to liquidate a fixed asset that is real estate, and in its place the taxpayer wants to build new buildings for the same activity.

Liquidation of a fixed asset not constituting a tax deductible cost

However, there are cases when, when liquidating fixed assets, we cannot classify their non-depreciated part as tax costs. This includes liquidation because of:

  • transfer of a fixed asset free of charge,

  • transfer for private purposes of the taxpayer - the fixed asset was not later sold,

  • losses resulting from liquidation, if these funds have lost their economic usefulness as a result of a change in the type of activity - if the taxpayer changes the type of economic activity and the given fixed asset will no longer be used in it.

Whether the non-depreciated value of a fixed asset subject to liquidation is recognized as tax deductible is due to its liquidation. If it is not related to a change in the type of business, or does not concern a free transfer or private use of an entrepreneur, in most cases it can be considered as a business cost. You should remember about the relevant documentation regarding the liquidation of the fixed asset.

Liquidation of a non-redeemed fixed asset in

In order to withdraw a fixed asset in, go to the tab RECORDS »FIXED ASSETS, select the appropriate fixed asset and then select LIQUIDATION. Then the window for adding a liquidation protocol will appear, where in the field ACCOUNTING RESEARCH LOSSES, select:

  • YES - if the unredeemed value may constitute a tax cost,
  • NO - if the remaining depreciation write-offs cannot be included in the KPiR.