Settlement of the replacement of a defective fixed asset
In business practice, it often happens that the assets purchased by the taxpayer entered in the register of fixed assets are replaced under the guarantee.
Guarantee replacement of a fixed asset and depreciation
The provisions of the Personal Income Tax Act do not directly refer to the issue of depreciation write-offs in the case of a guarantee replacement of a fixed asset with a new one. However, in such a situation, the taxpayer is certainly dealing with two fixed assets, not one, as it might seem.
Pursuant to Art. 22 h of paragraph 1. 1 point 1 of the Personal Income Tax Act: “Depreciation write-offs are made from the initial value of fixed assets or intangible assets, subject to Art. 22 k, starting from the first month following the month in which this measure or value was entered in the records (list), subject to article 22. 22e, until the end of this month, in which equalizing the sum of depreciation with their initial value or in which they were put into liquidation, disposed of or their shortage was found. "
In the case of a warranty replacement of a fixed asset, the sum of depreciation write-offs is certainly not equal to the initial value of FA, let alone its shortage. In this situation, the defective fixed asset should be liquidated and no depreciation write-offs should be made.
What to do with depreciation charges previously included in costs?
In this situation, one of three solutions can be used. First of all - the taxpayer may exclude from tax costs the depreciation write-offs recognized so far for a given fixed asset. The second way is to recognize revenue with the equivalent of the write-offs. Both these possibilities contribute to zeroing the depreciation write-offs of the replaced fixed asset.
There is also a third solution which, in the opinion of the tax authorities, seems to be the most appropriate. In connection with the return of a defective fixed asset, the taxpayer does not adjust the costs by depreciation write-offs, nor does it show them on the revenue side. The initial value of the fixed asset replaced under the guarantee should not change, therefore the depreciation charges previously included in tax costs should be included in the depreciation of the new fixed asset received during the replacement.
The above method was appreciated by the tax authorities, which is confirmed by the interpretation of the Director of the Tax Chamber in Warsaw of March 15, 2010, ref. No. IPPB1 / 415-889 / 09-5 / AM: “As for the new fixed asset received under the guarantee, it is entered in the fixed assets register - by setting the date of purchase and the initial value, which is the purchase price - on the basis of the invoice received during the guarantee replacement. The initial value determined in this way should be depreciated starting from the month following its entry into the fixed assets register. However, when including depreciation write-offs as costs, one should remember about the provisions of Art. 23 sec. 1 point 45 of the Personal Income Tax Act. According to it, write-offs for the consumption of fixed assets on the part of their value corresponding to the incurred expenses, among others, are not considered as tax deductible costs. for acquisition, deducted from the tax base with income tax or returned to the taxpayer in any form. Since depreciation charges for a defective asset were recognized as costs, thus reducing the tax base, the depreciation charges for a newly received asset in the amount corresponding to them will not constitute tax costs.
Therefore, after the warranty replacement, the Applicant makes depreciation write-offs in an unchanged amount, including them in full as tax costs until the sum of depreciation charges included in tax costs, i.e. made before and after the replacement, is equal to the purchase price of the fixed asset. (...) ".