Fixed asset depreciation rate incorrect

A taxpayer, when deciding to include a purchased item or device as fixed assets, must qualify it to the appropriate group of the Classification of Fixed Assets, and thus, determine the appropriate depreciation rate.

However, there are mistakes when the taxpayer uses the wrong rate of depreciation and notices this error only after closing the year and preparing the annual tax return. What should he do then?

Incorrect rate of depreciation - correction of the tax return

It would seem that the simplest solution in the event of adopting an incorrect depreciation rate is to correct the costs in the current period. Maybe the simplest - but completely wrong.

Unfortunately, in this case, the taxpayer will have to go back to the previous year and adjust the tax deductible costs for individual months, and then prepare an adjustment to the annual tax return.

Pursuant to Art. 22 sec. 8 of the Personal Income Tax Act, the taxpayer has the right to include as tax deductible costs depreciation write-offs for the consumption of fixed assets and intangible assets, taking into account the provisions of Art. 22a-22o of the above Act.

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Accordingly, the taxpayer should make depreciation write-offs from the initial value of fixed assets using the depreciation rates included in the List of depreciation rates. Assigning an appropriate depreciation rate is related to including a fixed asset in the appropriate type of the Fixed Assets Classification.

Therefore, in the event of incorrect depreciation write-offs, the entries in the register of fixed assets and intangible assets should be corrected, and the tax deductible costs should be adjusted retroactively.