Continuation of depreciation - special cases, part 1


Conducting business activity is sometimes associated with the occurrence of special circumstances, in which the taxpayer has many doubts as to finding the correct and advantageous way out of the tax situation. One such problem is the continuation of depreciation due to special circumstances.

ZCP donation for the spouse and the continuation of depreciation

The husband wants to donate his catering business to the taxpayer. The transfer will be in the form of a notarial deed. There is joint property in marriage. The company's revenues are taxed with a flat rate tax, and the taxpayer's husband is an active VAT taxpayer. The donation will be an organized set of tangible and intangible assets, so the recipient taxpayer will receive all the components of the company - fixed assets, equipment, rights resulting from concluded contracts, etc. After the transfer of the ZCP, the taxpayer's husband will liquidate his business.

One of the taxpayer's doubts is the continuation of the depreciation write-offs received in the form of a donation under the ZCP of fixed assets.

Pursuant to Art. 23 sec. 1 point 45a lit. and the act on personal income tax, depreciation write-offs from the initial value of fixed assets and intangible assets acquired free of charge, except for those acquired by inheritance or donation, are not tax deductible costs, if:

  1. this acquisition does not constitute income from the gratuitous receipt of goods or rights, or
  2. this income is exempt from income tax or
  3. this acquisition constitutes income on which, pursuant to separate provisions, the tax collection was abandoned.

Pursuant to Art. 22 g of paragraph 1. 1 point 3 of the Personal Income Tax Act for the initial value of fixed assets and intangible assets, taking into account paragraph 2-18, shall be considered in the event of acquisition by inheritance, donation or otherwise free of charge - the market value of the date of acquisition, unless the donation agreement or the free transfer agreement specifies this value in a lower amount.

On the other hand, the continuation of depreciation would take place in the event of a change in the legal form, division or merger, or when assets are transferred to the partnership as an in-kind contribution.

In this case, however, the initial value of fixed assets and intangible assets acquired by way of donation will be the market value as at the date of purchase, unless the donation agreement specifies it in a lower amount, where:

  1. the market value should be determined on the day of purchasing the donation, taking into account the donation agreement, if provided otherwise,
  2. the initial value of fixed assets for each individual asset may not be higher than the market value of these assets provided in the form of a donation.

The position is also reflected in the individual interpretation of September 3, 2015 issued by the Director of the Tax Chamber in Warsaw, ref. No. IPPB1 / 4511-699 / 15-2 / AM.

Dissolution of a general partnership and depreciation of acquired assets

The taxpayer conducts business activity consisting in granting loans, renting real estate and providing medical services. He is also a partner in a two-person general partnership, which performs activities similar to his activities. As it turned out, both the taxpayer and the other shareholder of this company jointly decided to dissolve it. The taxpayer, however, would like to continue its activity, but by taking it over in connection with its liquidation. The scope of the general partnership's business includes, inter alia,buildings, land, equipment, receivables and liabilities, employees, obligations of the company to the outgoing partner in terms of the return of expenditure and property attributable to him, rights and obligations under concluded lease and leasing agreements. In this situation, the taxpayer had doubts as to the possibility of continuing depreciation in the event of taking over the enterprise of the dissolved general partnership.

In this case, only part of the assets of the general partnership will be acquired by the taxpayer as a result of the dissolution of the partnership. The dissolution of the company will contribute to a claim against the other partner on account of his participation in the general partnership, and therefore part of the property will be acquired after the dissolution of the company through a separate acquisition of the company's assets in part attributable to the other partner. Therefore, the taxpayer will acquire the following assets:

  1. for a fee from the partner, as a result of which he will be able to determine their initial value at the purchase price,
  2. by dissolution of the general partnership according to their initial value resulting from the register of fixed assets and intangible assets of the general partnership.

By making depreciation write-offs on the assets listed in point 2, the taxpayer will be obliged to continue the methods of their depreciation used in the general partnership, taking into account the depreciation write-offs already made from their initial value.

The position is also reflected in the individual interpretation of March 29, 2016 issued by the Director of the Tax Chamber in Katowice, ref. No. IBPB-1-1 / 4511-777 / 15 / BK

Change of private lease on general terms into business lease and depreciation write-offs

The taxpayer conducts business activity consisting in renting real estate. Together with his wife, he and his wife acquired 2 real estate which they have been renting for over 10 years. Buildings are rented in the form of private lease on general terms. Numerous modernization and renovation works were carried out for over 10 years. In the lease settlements, depreciation write-offs were specified. The taxpayer decided to incorporate these buildings into his activities only and to settle the income from the lease of buildings only within its scope. He wonders what the continuation of depreciation should look like.

In this case, it should be emphasized that expenses deducted from the tax base or returned to the taxpayer in any form are not considered tax deductible costs, when each of the spouses has already reduced the tax base by depreciation write-offs from the initial value of fixed assets of these buildings, which was the case here. accident. On the other hand, when these buildings were handed over for the purposes of the taxpayer's business activity, depreciation write-offs calculated from the base, which have already been made, cannot be included in the costs.

The taxpayer, after accepting the above-mentioned buildings previously rented under private lease taxed on general principles, is obliged to continue the current method of depreciation of these assets, taking into account the depreciation write-offs already made (by both spouses). It should be emphasized that before starting depreciation, the taxpayer must choose one depreciation method and use it until the given fixed asset is fully depreciated.