Equipment - decommissioning and decommissioning

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Each enterprise has tangible assets used for the purpose of running its business. Some of them are classified as equipment which, according to the regulations, should be understood as assets that meet two conditions:

  • initial value above PLN 1,500 (net for active VAT payers; gross for entities exempt from VAT),
  • the expected useful life is less than 1 year.

These types of corporate assets may be stolen, liquidated or withdrawn for private purposes of the entrepreneur. What tax consequences should you take into account then? We explain below.

From January 1, 2020, the obligation to keep records of equipment has been abolished. This type of expense should be booked directly to tax costs. Expenses for the purchase of equipment may be tax-deductible on the invoice date.

Equipment - liquidation or theft

Both theft and the actual liquidation of the equipment do not oblige the entrepreneur to write off the costs of expenses for the purchase of equipment. In both cases, it is necessary to have the appropriate document:

  • in the case of theft - a police report (or statement) confirming the report of the theft of the equipment;
  • in the event of decommissioning - a protocol for decommissioning the equipment.

If the equipment is stolen, the only step the trader should take is to strike the property off the inventory. However, in the case of liquidation, the matter is not so obvious - its causes can be many:

  • sale - the taxpayer is obliged to document the sale with an invoice. This transaction will be subject to both income tax and VAT when the component serves a taxable activity. Entities running a KPiR show revenues from the sale of equipment in col. 8 - other revenues;
  • disposal - if the transaction is documented with a destruction protocol, which will confirm the disposal of the equipment, there will be no VAT and PIT consequences;
  • the renunciation of ownership, e.g. by throwing it into the garbage can - then there is no free service subject to VAT, so as a rule the renunciation of ownership of the equipment will not be subject to VAT and income tax.

In each of the above-mentioned In cases, an asset should be deleted from the equipment register. When selling equipment, e.g. for scrap metal (collection point), the entrepreneur must remember that the so-called reverse charge, whereby the buyer will be obliged to charge VAT.

Equipment - decommissioning

Withdrawal of equipment for business purposes - income tax

The entrepreneur has the full right to recall the components of the equipment for personal purposes. Then, the first step to be taken is to draw up a protocol for decommissioning the equipment, in which the reason for the decommissioning is given to the entrepreneur for private purposes. The protocol will be the basis for deletion from the equipment records.

Nevertheless, as is clear from Art. 23 sec. 1 point 49 of the PIT Act shall not be considered as tax deductible expenses incurred for the purchase of gradually consuming tangible assets of the enterprise, not included in the fixed assets in accordance with separate regulations - if it is found that these components are not used for the purposes of business activity, but they serve the personal purposes of the taxpayer, employees or other persons, or are unjustifiably off the premises of the enterprise.

The above provision raises many doubts as to the withdrawal of equipment and the settlement of this event on the basis of income tax.

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The director of the Tax Chamber in Warsaw referred to the issue of settling the withdrawal of personal equipment worth over PLN 10,000. In the interpretation of December 13, 2012, reference number IPPB1 / 415-1163 / 12-5 / KS stated that:

(...) the use for personal purposes of assets classified as gradually consuming assets (in this case, a flat), used in business activities for less than one year, causes the need to adjust tax deductible costs, if the expenses incurred for its purchase were previously included in the costs obtaining income. It is difficult to conclude that the expenditure on the purchase of a tangible asset that is gradually consumed was incurred in order to obtain income, since this asset will be withdrawn from business activity for personal purposes within 12 months.

At the same time, it should be emphasized that the cost adjustment applies to the entire amount of expenses incurred for the acquisition of a given asset. The instruction of the above-mentioned provision of Art. 23 sec. 1 point 49 of the Act clearly refers to acquisition expenditure, and not to a part thereof. This provision does not allow for a proportional settlement of expenses for the acquisition in relation to the period of using an asset for the purposes of business activity, if the tangible asset, due to the period of use expected by the taxpayer, shorter than a year, has not been included in fixed assets. Proportional accounting for purchase expenses in the form of depreciation charges applies only to fixed assets and intangible assets (...).

Importantly, the mere withdrawal of equipment with value for the entrepreneur's own needs does not have any income tax consequences. The entrepreneur does not write off the expense from tax deductible costs and does not show any income. The sale of retired equipment within 6 years from the first day of the month following that in which the equipment was withdrawn will represent operating income.

Recall of equipment for private use - VAT

On the other hand, the withdrawal of equipment for private purposes will have VAT consequences if the taxpayer was entitled to deduct (in whole or in part) VAT upon their purchase (or upon the acquisition of components). The event should be taxed with the appropriate VAT rate and shown in the VAT sales register. In this case, you can also use the printing of an internal document. VAT exemption in the event of withdrawal of equipment for private purposes is possible when the asset was used only for tax-exempt activities and the seller did not have the right to deduct VAT upon its purchase - this assumption will not apply to active VAT payers, as the equipment was used for taxable activities.
The recall will not have any negative effects, even if:
when purchasing an asset or purchasing component parts, there was no right to deduct VAT (e.g. purchase on a VAT invoice, margin) - this assumption may apply to active VAT payers.