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One-off depreciation write-offs in the year when the business was started

Entrepreneurs starting a business in a given tax year may, in principle, take advantage of the privilege of making one-off depreciation write-offs. However, in order to benefit from it, you should read about exceptions to the assets that may be covered by them. The application of a one-off depreciation charge results from the act and the taxpayer decides whether to use this option.

One-time depreciation write-offs

The act on personal income tax indicates which entities may use one-off depreciation write-offs. Pursuant to Art. 22k paragraph. 7 of the PIT Act, such a right is granted to taxpayers in the tax year in which they started running a business, subject to para. 11, and small taxpayers. They can make one-off depreciation write-offs from the initial value of fixed assets included in the group 3-8 of the Classification, with the exception of passenger cars. Write-offs may be made in the tax year in which these assets were entered into the register of fixed assets and intangible assets.

Attention!

A small taxpayer is a taxpayer whose sales revenues, including VAT in 2014, did not exceed EUR 1,200,000, i.e. PLN 5,015,000.

A taxpayer who started a business in 2015 may make one-off depreciation write-offs on purchased fixed assets, but he does not have to use this privilege.

Entrepreneurs may make depreciation write-offs on fixed assets:

not earlier than in the month in which they were entered into the register of fixed assets - once,
applying general rules - in installments every month, quarterly or once at the end of the year.

One-time depreciation write-offs - restrictions in application

However, not all taxpayers starting business activity can make one-off depreciation write-offs. According to Art. 22k paragraph. 11 of the Act on the Personal Income Tax Act, this right cannot be used by a taxpayer starting business activity who:

in the year of commencement of this activity, as well as in the period of two years, counting from the end of the year preceding the year of its commencement, he conducted business activity independently or as a partner in a company which is not a legal person, or
the activity was carried out by the spouse of that person, if there was joint property between the spouses at that time.

Important!

According to the interpretation of the Director of the Tax Chamber in Poznań of May 2, 2011, ILPB1 / 415-162 / 11-2 / AA, one cannot make one-off depreciation write-offs also for a company where at least one of the partners previously ran a sole proprietorship.

Another limitation is the amount of making one-off depreciation write-offs. In total, it may not exceed the equivalent of EUR 50,000 in a tax year. This amount is converted into Polish zlotys at the average exchange rate of the National Bank of Poland on the first business day of October, rounded up to PLN 1,000. The limit in 2015 is PLN 209,000.

The limit does not include the value of fixed assets for which one-off depreciation write-offs not exceeding PLN 3,500 were made.

Attention!

One-off depreciation write-offs cannot be applied to intangible assets, as well as to passenger cars.

Exceeding the limit of one-off depreciation write-offs and further depreciation

A taxpayer making one-off depreciation write-offs when exceeding the set limit cannot depreciate the entire amount at once. Then the initial value of the fixed asset above the limit is subject to further depreciation only from the next tax year.

The entrepreneur has the right to choose whether the fixed asset, the initial value of which exceeds the limit, should be included in a partial one-off depreciation write-off in a given tax year. Then, from the new year, it will make further write-offs in accordance with the adopted depreciation method: straight-line or degressive. He can also choose a method of depreciation other than a one-off write-off and make write-offs on general principles from the moment of accepting the fixed asset into the register.

When choosing a depreciation method when the limit is exceeded, you need to compare what is more profitable for achieving better tax benefits.

Example 1.

The entrepreneur started his business activity in February 2015, therefore he may make one-off depreciation write-offs. In the same month, he purchased two fixed assets for a total initial value of PLN 200,000. PLN and made a one-off write-off of these funds. In April, he purchased another fixed asset with an initial value of PLN 120,000. zloty. How should this fixed asset be depreciated? He made the comparison:

one-off costs may include the amount of PLN 9,000, as the limit is PLN 209,000.
depreciation calculated using the straight-line method at the 20% rate for the period from May to December 2015 is PLN 16,000 = (PLN 120,000 x 20%: 12 months) x 8 months

Due to the above, more favorable depreciation is generally based on the straight-line method. By the end of the year, a total of PLN 16,000 can be classified as tax deductible costs. PLN from depreciation write-offs and only 9 thousand. zloty.

It is worth remembering that it is the entrepreneur starting a business that decides on his own whether he will use the option of one-off depreciation write-offs from the initial value of the purchased fixed assets. The legislator provides for such a possibility, but the taxpayer does not have to use it. However, if it decides to make one-off depreciation write-offs, it cannot exceed the established limit. If it is exceeded, it also depends on the entrepreneur how he will continue to depreciate the fixed asset: