Sale of real estate not entered into the register of fixed assets

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Real estate is one of the basic components used in business activities. As a rule, if a given thing meets the statutory requirements, it may be entered by the taxpayer in the register of fixed assets. Such action allows to make depreciation write-offs from the initial value of a given component. On the other hand, large discrepancies in interpretations were caused by the sale of real estate, which was not included in the fixed assets register. The differences of views between the tax authorities and the courts eventually led to the change in the provisions of the act. Details later in the article.

Sale of real estate - legal status valid until the end of 2014.

The analyzed problem is regulated by Art. 14 sec. 2 point 1 of the PIT Act. Pursuant to the wording in force before the amendment, the act recognized as income from economic activity the amounts due for the sale of fixed assets used for business purposes, which were included in the register of fixed assets and intangible and legal assets.

Such wording of the provision meant that it was not entirely clear how to qualify the sale of real estate that was not entered in the register. After numerous disputes, the case was dealt with by the Supreme Administrative Court, which in the resolution of February 17, 2014, file ref. act II FPS 8/13, stated that:

Bearing in mind the content of the quoted provision of Art. 14 sec. 2 point 1 lit. a u.p.d.o.f., it should be stated that the legislator clearly (unequivocally) indicates that it is necessary to meet a total of two conditions for recognizing revenue from sale as revenue from business activity:

  • the sale must concern a fixed asset (first premise),
  • included in the register of fixed assets and intangible assets (second premise).

Consequently, taking into account the arguments presented, it should be stated that the thesis that in the legal state in force from 1 January 2004 it does not constitute income from economic activity within the meaning of Art. 14 sec. 2 point 1 lit. A of the act on personal income tax for the sale of real estate or a part of it or a share in real estate against payment, used for business purposes, which were not included in the register of fixed assets and intangible assets and which do not constitute assets indicated in art. 14 sec. 2c of this act.

Therefore, as it can be inferred from the presented resolution, the sale of assets used for business activity, but not entered into the fixed assets register, did not generate income from non-agricultural activities. This state of affairs was in force until the end of 2014.

Example 1.

In 2007, the taxpayer inherited an office space. In 2013, he started running an accounting office in this premises, but he did not enter it into the register of fixed assets and did not make depreciation write-offs. On May 20, 2014, he decided to sell the premises. Sales revenue will not qualify as business revenue.

Amendment and change of the legal status from 2015

Despite the favorable resolution of the Supreme Administrative Court, the legislator amended the wording of Art. 14 sec. 2 point 1 of the PIT Act. From 1 January 2015, the analyzed provision has the following content:

Income from business activity also includes:

  • revenues from the sale of assets for consideration, being:
    • fixed assets or intangible assets subject to inclusion in the register of fixed assets and intangible assets,

    • the components of the property referred to in Art. 22d paragraph. 1, with the exception of ingredients, the initial value of which is determined in accordance with article 5. 22g does not exceed PLN 1,500,

    • assets which, due to the expected period of use equal to or shorter than one year, have not been included in fixed assets or intangible assets,

    • assets constituting a cooperative right to a business premises or a share in such a right which, pursuant to Art. 22n paragraph. 3 are not included in the records of fixed assets and intangible assets

- used for the purposes related to economic activity or in the running of special departments of agricultural production, subject to paragraph 2c; when determining the amount of revenues, the provisions of para. 1 and art. 19 shall apply mutatis mutandis.

Currently, therefore, the decisive factor that the sale of real estate will be related to economic activity is only the use of a given thing to run the business. The issue of including in the register of fixed assets is currently irrelevant.

In accordance with the individual interpretation of the Director of the Tax Chamber in Katowice of February 19, 2015, no. however, it has not been included in the relevant records, it constitutes income from this activity, regardless of whether such an asset was acquired before or after 1 January 2015. In the very content of the presented interpretation there is the following thesis:

In the light of the above, it should be stated that the regulation of Art. 14 sec. 2 point 1 lit. and the above-mentioned of the Act in the wording in force from 1 January 2015, income from the sale of assets that meet the statutory definition of a fixed asset, subject to recognition in the register of fixed assets and intangible assets, was covered, regardless of whether the taxpayer introduced or not introduced these components to the register of fixed assets and intangible assets, as well as whether he included depreciation write-offs from their initial value as tax deductible costs.

Example 2.

The taxpayer bought a car garage as a private person in 2013. The following year he started running a car repair shop there. Although the garage was used for business purposes, the taxpayer did not enter it in the fixed assets register. In 2017, he sold it. According to the position of the tax authorities, even despite the fact that the garage has not been entered into the register of fixed assets in the previous legal state, the regulations currently in force should be applied to its sale. Accordingly, the sale of the garage is taxed as income from non-agricultural business activities.