Parking belonging to the building - how to depreciate?

In the course of the business, the entrepreneur uses many assets classified as fixed assets. Their initial value is recognized in costs through depreciation write-offs. Despite the existence of numerous studies on fixed assets, there are still many doubts as to the principles of depreciation of atypical assets. In this article, we will consider how to depreciate the parking lot belonging to the building.

Qualification of the car park to the appropriate category of fixed assets

Let us recall that pursuant to Art. 22a of the PIT Act, fixed assets are assets owned or jointly owned by the taxpayer, acquired or manufactured on their own, complete and fit for use on the date of acceptance for use with an expected period of use longer than one year, used by the taxpayer for the purposes related to the his economic activity.

Both buildings and structures (e.g. parking lots) can be included in the above category. This, in turn, makes it crucial to define the relationship between the building and the parking lot belonging to it.

In this regard, reference should be made to the provisions contained in the Regulation on the Classification of Fixed Assets (KŚT).

There we can also read that buildings are roofed construction objects, permanently connected to the ground, with built-in installations and technical devices, used for permanent needs. They are adapted to the presence of people, animals or the protection of objects. A carport is considered a special type of building: it is an above-ground room with no walls on all sides or even no walls at all. The term "building" also includes stand-alone underground construction works, such as shopping centers, workshops, and underground garages.

Further, we can read that the composition of a building as a single inventory object also includes auxiliary facilities serving a given building, for example, sidewalks, access roads, yards, squares, fences, wells.

Ancillary facilities serving more than one building should be classified as appropriate types according to their purpose.

The parking lot belonging to the building is an auxiliary facility that is assigned to the building. Therefore, it is not a separate fixed asset.

Parking belonging to the building as an auxiliary facility

It follows from the above that all squares, including the parking lot, belonging to the building are a component of the building itself. Consequently, their value is added to the initial value of the building and depreciated at the rate provided for the building.

However, in the event that the car park is added to an existing building, which is subject to depreciation, this type of action should be treated as an improvement of the fixed asset referred to in Art. 22 g of paragraph 1. 17 of the PIT Act.

Pursuant to the aforementioned provision, fixed assets are considered improved when the sum of expenses incurred for their reconstruction, expansion, reconstruction, adaptation or modernization in a given tax year exceeds PLN 10,000 and these expenses increase the value in use in relation to the value on the date of acceptance of the fixed assets. to use.

The improvement of fixed assets should be understood as:

• reconstruction, i.e. change (improvement) of the existing state of fixed assets to another;

• expansion, i.e. enlargement (extension) of property components, in particular buildings and structures, technological lines, etc .;

• reconstruction, i.e. replacement of fully or partially used assets;

• adaptation, i.e. adapting (reworking) an asset to be used for a purpose other than that for which it was originally intended or to give it new functional features;

• modernization, i.e. modernization of the fixed asset.

The expenditure on the improvement made increases the initial value of the fixed asset, which means that in the described example, the cost of building a car park will be settled over time through depreciation write-offs made for the building to which the car park belongs. The construction of the car park belonging to the building will be treated as an improvement of the fixed asset that increases the initial value of the building, which is the basis for the depreciation.

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Parking belonging to the building as an independent fixed asset

However, it should be emphasized that it is possible that the car park will not be an auxiliary object of the building and will be qualified as an independent fixed asset subject to depreciation.

In this case, the car park will be classified under the item 220 KŚT "HIGHWAYS, EXPRESSWAYS, STREETS AND OTHER ROADS", where the following are listed:

• inter-city motorways and expressways, including intersections and junctions with road lighting and signaling installations, slopes and embankments, ditches, retaining structures, traffic safety devices, road lanes for parking and protective barriers, culverts under roads and road drainage devices;

• streets and roads in urban and rural areas, including intersections, junctions and parking lots, for example, roads, streets, avenues, roundabouts, dirt roads, side roads, access roads, rural and forest roads, pedestrian paths, cycle paths, roads and pedestrian zones, along with road lighting and signaling installations, slopes and embankments, ditches, retaining structures, traffic safety devices, road lanes for parking and protective barriers, culverts under roads and road drainage devices;

• overground and underground passages.

In this case, the car park will constitute a structure considered as a fixed asset, which, according to the list of depreciation rates, uses an annual rate of 4.5%.

As a result, the entrepreneur classifies the car park as a separate fixed asset and recognizes its initial value as tax deductible costs through depreciation write-offs.

We emphasize that such a case will take place when the parking lot will not be treated as an auxiliary object of the building, but as an independent structure.

On the other hand, the other rules related to the determination of the initial value and depreciation of a car park as a separate fixed asset are the same as for other assets.

If the car park was built by a taxpayer, the taxable amount to be depreciated will be the manufacturing cost

Pursuant to Art. 22 g of paragraph 1. 4 of the PIT Act, the cost of production is the value, in the purchase price, of fixed assets used to produce: tangible assets and third-party services used, costs of remuneration for work with derivatives and other costs that can be included in the value of manufactured fixed assets. The cost of production does not include the value of the taxpayer's own work, his spouse and minor children, overheads, selling costs and other operating costs and financial operations costs, in particular interest on loans (credits) and commissions, excluding interest and commissions charged to the day of putting the fixed asset into use. A car park that is not a part of the building is an independent fixed asset for the entrepreneur, subject to depreciation at the annual rate of 4.5%.

Summarizing the findings, we can indicate that the issue of depreciation of a car park used in the taxpayer's business depends on whether the car park is an auxiliary building object or is an independent construction unit.