Sale of a fixed asset withdrawn from activity or after its completion

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Entrepreneurs use fixed assets when running a business. In some situations they are withdrawn from activity or the activity is closed down. The question then arises how to account for the sale of the fixed asset.

Pursuant to the provisions of both Income Tax Acts, depreciable fixed assets are owned or jointly owned by the taxpayer, acquired or manufactured on their own, complete and fit for use on the date of acceptance for use:

  • structures, buildings and premises owned separately,

  • machines, devices and means of transport,

  • Other items

- with an expected period of use longer than one year, used by the taxpayer for the purposes related to his business activity or put into use on the basis of a rental or lease agreement.

Withdrawal and sale of a fixed asset

Pursuant to Art. 14 sec. 2 point 1 of the PIT Act, the income from business activity is also “income from the sale of fixed assets used for the needs related to business activity” for consideration. Withdrawal of a fixed asset from business activity and transferring it for personal purposes of the taxpayer is not a sale against payment, therefore it does not generate taxable income.

On the date of handing over the vehicle for personal needs of the taxpayer, the asset should be deleted from the fixed assets register, providing the reason for the removal, eg "handing over the car for the personal needs of the entrepreneur (partner)". This activity does not require additional documentation.

Withdrawal of a fixed asset from economic activity and its transfer to the personal needs of the taxpayer does not generate income from the so-called free benefits, even if the component moves between the property of the general partnership and the property of the partner of this partnership. In the interpretation of the Director of the Tax Chamber in Katowice of April 30, 2010, No. IBPB1 / 1 / 415-139 / 10 / AB, we read that:

“(…) The presented future event shows that the Applicant intends to withdraw from economic activity fixed assets in the form of a land property and a farm building located on it (the so-called transfer for private purposes). Taking into account the future event presented and the above-mentioned provisions of the tax law, it should be stated that the mere act of withdrawing real estate from economic activity and transferring it for private (personal) purposes will not have any tax consequences in the personal income tax (...) ”.

However, income from business activities should be recognized in relation to those previously withdrawn from business activities, if they are sold before the expiry of 6 years, counting from the first day of the month following the month in which they were withdrawn from business.

Example 1.

On July 14, 2011, the taxpayer withdrew the passenger car from business activity. The taxpayer's intention is to sell this car. However, for the paid disposal to be neutral from the point of view of income tax, it may not take place earlier than January 1, 2018.

If the fixed asset was sold within 6 years from the date of its withdrawal from economic activity, the taxpayer at that moment has the possibility to reduce the revenue by the unamortized part of the initial value of the car. The cost of obtaining revenue from the sale of a fixed asset is the cost of purchasing a car less the sum of depreciation charges.

Such a method of income settlement when there is a sale of a fixed asset previously withdrawn from business activity was confirmed, inter alia, by Director of the Tax Chamber in Katowice in an individual interpretation of May 14, 2014, file ref. IBPBI / 1 / 415-188 / 14 / SK, in which we can read:

"(...) when determining the income from the sale of the passenger car indicated in the application, the initial value of the above-mentioned the car shown in the register of fixed assets and intangible assets, reduced by the depreciation write-offs. The cost of obtaining income in determining the income from the above-mentioned Therefore, the title will be the value of expenses incurred for its acquisition less depreciation write-offs. As a consequence, the non-depreciated part of the initial value of the car will constitute a tax deductible cost for the Applicant, in accordance with Art. 23 sec. 1 point 1 lit. b and art. 24 sec. 2 point 1 of the above-mentioned the Personal Income Tax Act (...) ”.

Sale of a fixed asset after the liquidation of the company

When liquidating a business, taxpayers must make a list of the assets remaining as of that date. It should include, inter alia: the (name) of the asset, the date of its acquisition, the amount of expenses related to the acquisition, including those recognized as tax deductible costs, as well as the initial value, the depreciation method, the sum of depreciation charges.

The sale of assets after the liquidation of business activities within 6 years of the liquidation results in the obligation to settle the income from business activities. The method of determining the income from the sale of assets taken over after the liquidation of business activity is specified in Art. 24 sec. 3b of the PIT Act. Pursuant to this provision, income is calculated as the difference between the income from the disposal of assets for consideration and the expenses for their acquisition, not included in tax deductible costs in any form.

After the sale of a fixed asset, when income arises, the advance payment should be calculated according to the same rules as the entrepreneur applied to the income from the liquidated activity and paid by the 20th day of the month following the month in which the sale took place.

However, after the end of the tax year in which the sale took place, this transaction should be shown in the annual tax return. Such a position was confirmed by the Director of the Tax Chamber in Bydgoszcz in the individual ruling of March 13, 2014, ITPB1 / 415-1288 / 13 / AK:

“(...) income from the planned sale of a fixed asset (workshop building) after the end of business activity will be income from non-agricultural business activity. Income on this account is subject to taxation in accordance with the form of taxation selected for the business activity, in this case the so-called flat tax - 19%. The income from the sale will be the difference between the income from the sale of the asset for consideration and the initial value shown in the records of fixed assets and intangible assets, increased by the sum of depreciation referred to in art. 22 h of paragraph 1. 1 point 1 made from this fixed asset (…) ”.