Car depreciation - methods
Calculating depreciation charges is nothing more than monitoring the consumption of an asset. Depreciation can only be charged on fixed assets that have been entered into the company's Fixed Assets Register. Depreciation charges are tax deductible. It depends on the selected depreciation method how quickly a given fixed asset will be depreciated and how the depreciation will affect the cost of a given period.
The regulations regulate the use of various depreciation methods depending on the type of fixed asset. For passenger cars, it is possible to use depreciation methods such as those described below.
Linear cushioning of a passenger car
For passenger cars classified in the Classification of Fixed Assets under the code KŚT 741, the standard method of depreciation is precisely the straight-line method. The rate for passenger cars is 20%. This means that the car will be depreciated for a period of 5 years.
Individual depreciation rate
The individual rate may be applied to fixed assets first entered into the records of a given taxpayer, which are used or improved.
- investment in a foreign fixed asset - if the investment in a foreign fixed asset causes that the expenses incurred for its improvement accounted for at least 20% of the initial value of this fixed asset, the provisions allow for the application of an individual depreciation rate to this fixed asset, which is the basis for taking into account the given investment in the company's costs (Article 22j paragraphs 1-2);
- used fixed assets - such can be considered those where the entrepreneur proves that they were used for at least 6 months before their purchase. The regulations do not specify exactly how to prove prior use. It is at the discretion of the taxpayer.
The highest individual rate for improved or used passenger cars is 40%, which results from the application of the highest coefficient provided in this case by the regulations → 2.0. This means that the car will be amortized within 2.5 years, which is twice as fast as using the flat rate.
Accelerated linear depreciation
In some cases, the provisions of the PIT Act also allow for the application of a coefficient for increasing the linear depreciation of a passenger car, not higher, however, than 1.4 (Article 22i (2) (2)). This method applies to means of transport (excluding sea rolling stock) which are used more intensively considering average conditions or which require particular technical efficiency. However, this nature has not been specified in more detail in tax regulations.
When using accelerated straight-line depreciation, the highest rate may be 28%. This means that the depreciation period of such a car will be 3 years and 7 months.
What depreciation cannot be used for passenger cars?
When selecting the depreciation methods for a passenger car, the following cannot be used:
- declining depreciation with a factor of 2.0
- one-off depreciation (from de minimis aid).
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In the case of passenger cars, there is a restriction as to recognizing depreciation charges in tax costs. Art. 23 sec. 1 point 4 of the PIT Act says that depreciation write-offs in the part determined on the value of the car exceeding the equivalent of EUR 20,000 converted into zlotys according to the average euro exchange rate announced by the National Bank of Poland on the day the car is put into use are not considered tax deductible costs.
That is, when the initial value of a passenger car exceeds the equivalent of EUR 20,000, the entrepreneur should each time exclude from the costs the part of the depreciation write-off that corresponds to the initial value of the car exceeding the limit.
