Fixed assets - what you should know about them

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Definition

Pursuant to Art. 3 sec. 15 of the Accounting Act of September 29, 1994, we consider tangible fixed assets and fixed assets equivalent to them, with an expected useful life longer than one year, complete, fit for use and intended for the needs of the entity. This means that the fixed asset cannot be used during one production cycle and must generate economic benefits (and therefore cannot be incomplete or damaged).

Therefore, fixed assets include:

  • real estate (including land, perpetual usufruct right to land, constructions and buildings that are separately owned premises, cooperative ownership right to a dwelling and cooperative right to business premises)
  • machines, devices, means of transport and others
  • improvements in foreign fixed assets
  • livestock

Valuation methods

When determining the initial value of the fixed asset, you must comply with the provisions referred to in article 1. 22g of the Personal Income Tax Act. Therefore, we assume the initial value of fixed assets as:

  • in the event of a purchase for consideration - the purchase price
  • in the case of a partially paid purchase - the purchase price increased by the value of the income from the benefit in kind (initial value = purchase price + reduced value)
  • if manufactured on its own - manufacturing cost
  • in the case of acquisition by inheritance, donation or otherwise free of charge - the market value on the day of acquisition, unless the donation agreement or the free transfer agreement specifies this value in a lower amount
  • in the event of purchase in the form of an in-kind contribution made to a company that is not a legal person:
    - the initial value from which the depreciation was made - if the subject of the contribution was depreciated (accordingly, this principle applies to an asset made in the form of an in-kind contribution (in-kind) to a company that is not a legal person by a partner who received this component as a result of
    • in the event of a purchase for consideration - the purchase price
    liquidation of a company that is not a legal person or withdrawal from such a company)
    - expenses incurred for the acquisition or production of the subject of contribution, not included in tax deductible costs in any form - if the subject of the contribution was not depreciated (accordingly, the rule applies to an asset made in the form of an in-kind contribution (in-kind) to a company that is not a legal person by a partner, which he received this component as a result of the liquidation of a company that is not a legal person or withdrawal from such a company
    - market value - if it is impossible to determine the expenses for the purchase or production of the subject of the contribution by the contributing partner, who is a natural person, and the subject of the contribution was not used by the contributor in the business activity conducted, with the exception of intangible assets produced by the partner on his own
  • in the event of receipt in connection with the liquidation of a legal person (except for property received in connection with the liquidation of a legal person, which was previously contributed to that legal person as a non-cash contribution in the form of an enterprise or its organized part) the value of individual fixed assets and intangible assets determined by the taxpayer and legal, but not higher than their market value.

Depreciation methods

The term depreciation is defined as the process of consumption of a fixed asset, expressed in monetary value. We divide the depreciation methods into: linear, degressive, individual and one-time (accelerated). The depreciation method must be selected when the asset is received and cannot be changed, although there are options for increasing or decreasing the depreciation rates.

The linear method consists in evenly distributing the value of a fixed asset over time, therefore it assumes that the object in use is evenly worn during the entire period of use. The depreciation rates can be found in Appendix 1 to the Personal Income Tax Act. At the same time, these rates can be increased in the case of: buildings and structures used in poor conditions (up to 1.2) or bad (up to 1.4); machines, devices and means of transport (except for marine floating rolling stock) used more intensively in relation to average conditions or requiring special technical efficiency (coefficient up to 1.4) and for machines and devices included in groups 4 - 6 and 8 KŚT, subjected to rapid technical progress (factor up to 2.0).

In the degressive method, it is assumed that the economic usefulness of fixed assets decreases with their use. Therefore, the depreciation write-offs in the initial years of use are higher than in the following years. the use of this depreciation method is possible in relation to machines and devices included in groups 3 - 6 and 8 KŚT and means of transport, except for passenger cars. The first depreciation is calculated according to the rates given in the list, increased by a factor not higher than 2.0. The amount of this rate remains unchanged, but the basis changes - write-offs are made based on the initial value of the fixed asset reduced by the current depreciation write-offs.

Individual depreciation is based on the use of individual rates due to the introduction of a used or improved fixed asset.

The one-time depreciation method can be used in two cases. The first of them concerns fixed assets with a value of less than PLN 3,500, which can be immediately charged to costs. The second situation is related to de minimis aid, according to which certain economic operators (small taxpayers and start-ups) can apply a one-off depreciation up to a total amount of EUR 50,000.

Fixed assets not subject to depreciation

Fixed assets that are not subject to depreciation include, following the legislator:

  • land and rights to perpetual usufruct of land
  • residential buildings with cranes located in them or residential premises used for business activity or leased or rented under a contract, if the taxpayer does not decide to depreciate them
  • works of art and museum exhibits
  • goodwill, if this value was created in a different way than as a result of the acquisition of the enterprise or its organized part by:
    - purchase
    - acceptance for use against payment, and depreciation in accordance with the provisions of Chapter 4a of the Personal Income Tax Act is made by the user
  • assets not used as a result of cessation of the activity in which they were used, they are no longer depreciated from the month following the month in which such activity was discontinued