Classification of buildings for income tax purposes
The addition of Art. 24b is related to the taxation of income from the ownership of the fixed asset. In terms of the subject of the tax, this regulation refers to the "Classification", without defining this concept. Nevertheless, there should be no doubt that this is the classification referred to in Art. 16i paragraph. 2 point 3 of the above-mentioned of a legal act, i.e. the Classification of Fixed Assets. Entrepreneurs have many doubts about the classification of construction objects (mainly buildings), therefore in the following article we describe how to classify them correctly.
Classification of building objects according to regulations
As is clear from the content of Art. 24b of the Corporate Income Tax Act, income tax on revenues from ownership of a fixed asset located in the territory of the Republic of Poland, the initial value of which exceeds PLN 10,000,000, in the form of:
- a commercial and service building classified in the Classification as:
- shopping center,
- department store,
- independent shop and boutique,
- other commercial and service,
- an office building classified in the Classification as an office building
- is 0.035% of the tax base for each month.
Moreover, in sec. 2 indicates that the above-mentioned standard does not apply to:
- fixed assets referred to in paragraph 1. 1, from which the depreciation has ceased on the basis of article. 16c point 5;
- fixed assets referred to in paragraph 1. 1, paragraph 2, used exclusively or mainly for the taxpayer's own needs.
As can be seen from the above, one of the most important elements of the above-mentioned legal norm is the proper classification of a fixed asset in the form of a commercial and service building or an office building. It should be emphasized that from 2018 a new Classification of Fixed Assets (KŚT), included in the Regulation of the Council of Ministers of October 3, 2016, has been in force. Unlike the previous classification, the current Classification does not contain descriptively developed tables for individual types of fixed assets. In this case, the legislator used a different legislative approach. Well, in the introductory explanations for the group 1 discussed in this article (Buildings and premises as well as the cooperative right to commercial premises and the cooperative ownership right to a dwelling), he referred to the Polish Classification of Construction Objects (PKOB). Although in the act on corporate income tax, art. 24b reference is made to the Classification of Fixed Assets, the correct classification of a commercial building or an office building for the purposes of Art. 24b above. of the legal act takes place in conjunction with the Polish Classification of Construction Objects (PKOB). As it follows from the explanations of the KŚT, the divisions occurring, among others, in in group 1, they were developed on the basis of the systematized list of construction objects of the Polish Classification of Construction Objects (PKOB) and the Polish Classification of Products and Services (PKWiU). Therefore, the objects included in these groups were also assigned the appropriate PKOB and PKWiU symbols. It was also indicated that the sign "*" next to the symbols PKOB and PKWiU means that the scope of a given grouping of these classifications does not fully correspond to the scope of a given grouping of KŚT. In cases where it was impossible to assign specific classification symbols, the "-" sign was placed in the "Relations" column.
Therefore, in order to correctly determine the scope of taxation based on the content of Art. 24b above. of the Act, both classifications should be analyzed. For the purposes of the said provision, commercial and service buildings in the Classification of Fixed Assets were marked with the type 103, which corresponds to the symbol 123 from PKOB. In turn, office buildings are marked in the Classification of Fixed Assets under the type 105, which corresponds to the symbol 122 from PKOB. Importantly, the "*" sign was not indicated next to the PKOB symbols, which means that the scope of a given grouping of these classifications fully corresponds to the scope of a given grouping of KŚT. The above leads to the conclusion that for the purposes of Art. 24b of the Corporate Income Tax Act, more important, at least from a practical point of view, will be the Polish Classification of Construction Objects, and in particular its part containing the classification scheme with explanations.
In the PKOB group of interest to us 123, it was indicated that the class includes:
- shopping centers, department stores,
- independent shops and boutiques, halls used for fairs, auctions and exhibitions,
- indoor markets, gas stations,
- service stations, pharmacies, etc.
However, this class does not include:
- shops in buildings primarily for other purposes.
In turn, in the PKOB group 122 office buildings, it was indicated that this class includes:
- buildings used as workplaces for the activities of an office, secretariat or other of an administrative nature, e.g. buildings of banks, post offices, municipal offices, municipal offices, ministries, etc., administrative premises;
- buildings of conference centers and congresses, courts and parliaments
However, this class does not include:
- offices in buildings intended primarily for other purposes.
As can be seen from the above, for the purposes of Art. 24b of the Corporate Income Tax Act, commercial and service buildings included in the grouping of 123 KŚT should be assigned to the grouping of 103 KŚT and accordingly office buildings included in the grouping of 122 KŚT should be assigned to the grouping of 105 KŚT.
Practical tips for classifying building objects
A single structure is usually taken as the classification unit (e.g. building, road, transmission lines, etc.). However, in some cases, the property is a complex of building structures. Then each building should be classified as an independent unit. For example, if a general education school consists of a school building and a boarding house, the school building should be classified in 1263 and a boarding house in 1130. However, where we do not have details of the complex to be classified, the whole is classified in 1263 as per with the main function of the school in an exemplary complex of buildings.
In the case of construction works that are used or intended for multiple purposes (e.g. a residential building that is simultaneously a hotel and an office), they are classified under one heading according to their main use.
The main use should be defined as follows:
- determine what percentage of the total usable area is earmarked for different purposes, according to the groupings of classification - at the most detailed level,
- then the work is classified according to the "top - bottom" method: first, the section - 1 digit (building or civil engineering) is determined, then the division at the level of 2 characters (residential building, non-residential building, transport infrastructure, etc.) most significant within the section, then the group (3 digits) the most important within the division, the class (4 digits) with the highest share of the usable area within the group.
This principle is illustrated by the following theoretical example:
The total usable area of the building is divided into:
|Type of use||Percentage share of the total area user||PKOB class|
|Credit institution office||10%||1220|
|Shops and pharmacy||20%||1230|
In this case, the building should be classified as follows:
- in section 1 "Buildings";
- in the 2-digit heading 12 "Non-residential buildings", representing the main percentage (70%) under section 1;
- in the 3-digit group 126 "Publicly accessible cultural facilities, educational buildings or hospitals and medical care facilities", constituting the largest percentage (40%) under heading 12;
- in the 4-digit class 1262 "Museums and libraries", constituting the largest percentage share (30%) within group 126;