Fixed assets in the company - important information

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When running a business, entrepreneurs use various types of assets. The purchase of some of them may be recognized directly in tax deductible costs, but some may be recognized as fixed assets. In such a situation, the expenditure incurred for their purchase will be included in the costs in the form of depreciation charges.

Fixed assets - definition

The concept of fixed assets has been defined in both the balance sheet and tax law. It is regulated by three laws. Pursuant to Art. 22a paragraph. 1 of the Personal Income Tax Act, fixed assets owned or jointly owned by the taxpayer, manufactured or acquired on their own, fit for use and complete, are subject to depreciation:

  • structures, buildings and premises owned separately,
  • machines, devices and means of transport,
  • Other items.

The foreseeable period of use should be longer than one year, in addition, they must be used by the taxpayer for the purposes related to his business activity or put into use on the basis of a lease, tenancy or contract specified in art. 23a point 1 of the PIT Act.

Fixed assets - classification

The classification of fixed assets (KŚT) is a place where objects classified as fixed assets are systematized, which is used to determine depreciation rates, statistical research and for registration purposes. Fixed assets can be divided into 10 groups:

  1. Group 0 - Lands,
  2. Group 1 - Buildings and premises, cooperative right to non-residential premises,
  3. Group 2 - Civil engineering facilities,
  4. Group 3 - Boilers and power machines,
  5. Group 4 - Machines, devices and apparatus for general use,
  6. Group 5 - Specialized machines, devices and apparatuses,
  7. Group 6 - Technical equipment,
  8. Group 7 - Means of transport,
  9. Group 8 - Tools, instruments, movables and equipment,
  10. Group 9 - Livestock.

The 10-group qualification has been divided into subgroups, marked with two-digit symbols, and a third sub-group, marked with three-digit symbols.

Fixed asset - basic rules for determining the initial value

Fixed assets are included in the fixed assets register in the amount of their initial value. It is the basis for determining and making depreciation write-offs. Depending on the method of acquiring a fixed asset, its initial value will vary.

Fixed assets are valued according to:

  • purchase price in the event of their purchase against payment,
  • manufacturing cost in the case of self-production,
  • market value in the case of free acquisition, inheritance or donation (unless the donation agreement or the free transfer agreement specifies this value in a lower amount).

The manufacturing costs of a fixed asset include costs that are directly related to its manufacture:

  • value of materials used (in the purchase price),
  • Foreign Service,
  • remuneration of employees directly related to the production of the component,
  • delegation costs,
  • assembly costs,
  • renovation costs,
  • inspection baskets,
  • improvements that were incurred prior to the handover of the asset.

The initial value will also be influenced by:

  • costs of servicing contracted liabilities in order to finance them,
  • exchange rate differences for the period from the commencement of construction of the fixed asset to the date of its commissioning.

The initial value of a fixed asset should be determined once, and a change in its value may only be caused by its improvement, as well as when the initial value of a fixed asset has been determined contrary to the provisions or in the case of a revaluation of fixed assets.

Acceptance of a fixed asset for use

The receipt of a fixed asset is associated with the issue of an OT accounting document (acceptance of a fixed asset). This document should contain:

  • consecutive number of OT,
  • name and address of the entity issuing the document of receipt of the fixed asset,
  • date of issue,
  • the name of the fixed asset,
  • characteristics of the fixed asset,
  • place of use,
  • date and number of the delivery note,
  • date of acceptance for use,
  • the value of the fixed asset,
  • depreciation rate,
  • depreciation method,
  • symbol of the Classification of Fixed Assets,
  • inventory number,
  • signatures of the team adopting the asset.

Depreciation methods

Line depreciation

It is the primary method of depreciation of fixed assets. In order to start depreciation using this method, the entity must determine the initial value of the component, specify the type of asset in accordance with the Classification of Fixed Assets. On the basis of the selected group, the depreciation rate should be determined, and the value of the established annual write-off is a constant amount throughout the depreciation period. The depreciation ends when the value of the write-offs equals the initial value of the asset or when the asset is liquidated. The taxpayer is obliged to enter the asset into the fixed assets register at the latest in the month of its acceptance for use.

Accelerated depreciation

Accelerated depreciation is a form of straight-line depreciation. If the fixed assets are used in bad conditions or more intensively than the average conditions, it is possible to increase the depreciation rate. Then it is multiplied by the coefficient included in the list of rates. Depreciation rates can be increased for:

  • fixed assets included in groups 3-6 and 8 of the KŚT group, subject to rapid technical progress - with the use of coefficients not higher than 2.0;
  • means of transport, including passenger cars, used more intensively in relation to average conditions or requiring particular technical efficiency - with the use of coefficients not higher than 1.4 in this period;
  • buildings and structures used in conditions: a) deteriorated - using coefficients not higher than 1.2, b) bad - using coefficients not higher than 1.4.

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Individual depreciation

With regard to used or improved fixed assets entered into the register for the first time, taxpayers may themselves determine the depreciation rates. The depreciation period may not be shorter than that specified in the regulations. Individual depreciation may be applied to:

  • fixed assets included in groups 3-6 and 8 of the Classification and depreciation period is: a) 24 months - when their initial value does not exceed PLN 25,000, b) 36 months - when their initial value is higher than PLN 25,000 and does not exceed PLN 50,000, c) 60 months - in other cases;
  • means of transport, including passenger cars, where the depreciation period is 30 months;
  • non-residential buildings (premises) for which the depreciation rate from the List of depreciation rates is 2.5%:

    • 40 years - reduced by the full number of years that have elapsed from the date they were put into use for the first time until the date of entry into the records of ŚT and WNiP, however the depreciation period cannot be shorter than 10 years for other buildings (premises) and structures,
    • 10 years (except permanently land-bound commercial and service buildings listed in type 103 of the Classification and other non-residential buildings listed in type 109 of the Classification, permanently land-bound goods kiosks with a cubature of less than 500 m3, camping houses and substitute buildings for which the period of depreciation cannot be less than 3 years).

Declining cushioning

The declining depreciation allows for the application of an increased factor not higher than 2.0, which shortens the depreciation period of the fixed asset. It is recommended for entities that need high costs in a short time.

This method consists in determining the initial value of an asset and applying the depreciation rate given in the List of Depreciation Rates, increased by a determined factor in the first year of depreciation. In the tax year in which the specified annual depreciation amount would be lower than the annual depreciation amount calculated using the straight-line method, taxpayers are required to make further depreciation write-offs according to the straight-line method (Article 22k (1) of the Personal Income Tax Act).

One-time depreciation

Fixed assets can be depreciated on a one-off basis in three different cases:

  • under de minimis aid, fixed assets included in the 3-8 group KŚT, excluding passenger cars. It can be used by entities that meet the conditions of a small taxpayer. These are entities whose gross sales revenues in the previous year did not exceed EUR 1,200,000, as well as entities that started operating during the tax year. The one-time amortization limit is EUR 50,000. Within 3 years, the total amount of de minimis aid may not exceed EUR 200,000, for transport companies this limit has been reduced to EUR 100,000;
  • in the case of low-value fixed assets with a value below PLN 10,000 zlotys;
  • for brand new fixed assets, provided that:

    a) the initial value of one fixed asset purchased in the tax year is at least PLN 10,000 or

    b) the total initial value of at least two fixed assets purchased in the tax year is at least PLN 10,000, and the initial value of each of them exceeds PLN 3,500. In the above cases, the one-off limit is PLN 100,000.

Fixed assets - liquidation

The liquidation of a fixed asset is associated with:

  • a decision to liquidate a fixed asset,
  • the actual liquidation of the measure.

The decision on the liquidation of a fixed asset is connected with the generation of the LT document - liquidation of a fixed asset, which contains the following data:

  • the name of the unit where the LT is issued and its full address,
  • consecutive number of the proof,
  • date of issue,
  • the name of the fixed asset,
  • the inventory number of the fixed asset,
  • a decision of the liquidation commission stating the reason and method of liquidation of the fixed asset,
  • signatures of members of the liquidation commission,
  • signature of the employee responsible for the management of fixed assets in the unit,
  • signature of an authorized accounting employee,
  • signature of the head of the unit,
  • comments on the liquidated fixed asset.

Remember to prepare a fixed asset liquidation report.