Re-amortization of a withdrawn car
When a car entered into the register of fixed assets ceases to serve the purposes of economic activity, the taxpayer may withdraw it from the company for private purposes. In such a situation, it does not matter whether the car is fully depreciated or not. Additionally, in some situations, the legislator allows for the re-depreciation of a car that has already been fully depreciated. Check when it is possible to re-amortize a withdrawn car!
The car is put back into business and it is re-depreciated
If the entrepreneur decides to re-use the previously withdrawn passenger car in his business, there are no contraindications to check the car in again as a fixed asset.
Depreciation write-offs are made from the initial value of fixed assets, starting from the first month following the month in which this asset was entered into the records, until the end of the month in which the sum of depreciation is equalized with their initial value. This is due to Art. 22 h of paragraph 1. 1 point 1 of the PIT Act.
Therefore, if the taxpayer included in tax deductible costs the depreciation write-offs made from the entire initial value of the car, which means that the car was fully depreciated and the sum of the depreciation was equalized with the initial value, the re-introduced car to the company cannot be re-entered (a second time). subject to depreciation. Then it must be entered in the register of fixed assets at the initial value in which it appeared in it before it was withdrawn. It is true that the re-recognition of a vehicle as a fixed asset will not be associated with the right to its depreciation, nevertheless the car will appear in the register of fixed assets, which will give the taxpayer the opportunity to recognize expenses related to the operation of the car directly in tax deductible costs.
A fully depreciated car cannot be depreciated a second time if the entrepreneur brings it back into the company's assets.
However, if the car was not fully depreciated when it was withdrawn from operation, depreciation should be discontinued. The last depreciation should be for the decommissioning month. Then, when it is transferred for private purposes, the undepreciated initial value of the car cannot be recognized as tax deductible costs. If the taxpayer will re-use the car in its business activity, the car should be entered in the register of fixed assets and intangible assets according to the previous initial value (it is the same fixed asset). In addition, the taxpayer should determine the depreciation taking into account the write-offs made so far and continue the previously adopted depreciation method.
A partially depreciated car should be depreciated on a continuation basis.
Re-depreciation of an improved car
The provisions of the Personal Income Tax Act do not provide for the possibility of re-depreciation of a fixed asset. Depreciation write-offs can be made only when the taxpayer has incurred expenses to improve the depreciated fixed assets.
The principle of increasing the initial value of a fixed asset by expenses incurred for its improvement (exceeding PLN 10,000) is contained in Art. 22 g of paragraph 1. 17 of the PIT Act. It should be added that the expenses for the improvement of a fixed asset also include expenses for the purchase of components or peripheral parts, the unit purchase price of which exceeds PLN 10,000.
Expenditure for improvement increases the initial value of a fixed asset also when it is fully depreciated, causing an extension of its depreciation period. Improvement of an asset that has been fully depreciated causes further depreciation write-offs from the initial value increased by the amount of the improvement made. However, it should be emphasized that depreciation write-offs should be made only up to the amount of improvement. It should also be noted that the depreciation of the improved fixed asset should be made using the previously used depreciation method.
The initial value of the fixed asset was PLN 60,000. The car was fully depreciated using the straight-line method using a depreciation rate of 20%, and then taken out of operation. The taxpayer improved it and decided to reintroduce the car to the fixed assets register. The total value of the expenditure was PLN 12,000.
The taxpayer may resume depreciation, the current initial value of the car is PLN 72,000 (60,000 + 12,000), which means that the monthly depreciation charge is PLN 1,200 [i.e. (72,000 x 20%) / 12 months] therefore the taxpayer will make depreciation charges for 10 months: (PLN 72,000 - PLN 60,000): PLN 1,200 / month = 10 months.
The car is handed over to the spouse's activity and re-depreciation
In this case, the situation is identical to that when the entrepreneur re-introduces the previously recalled car to his company's assets.
If the co-owners of the car are spouses and there is joint property between them, then the car cannot be subject to double depreciation. The Director of the Tax Chamber in Bydgoszcz, in the individual ruling of June 13, 2011, ITPB1 / 415-284 / 11 / RR, stated that in the event that one of the spouses takes over an asset used previously and depreciated in the spouse's business for a separate activity, its initial value is to be determined in the amount of the initial value specified in the register (list) of the spouse who has used this asset in his business activity so far. As pointed out by the authority, if the initial value of such a fixed asset has not yet been fully depreciated, the spouse taking over the asset should determine the depreciation taking into account the write-offs made so far, and also continue the depreciation method adopted by the spouse.
The tax office rightly concluded that in such situations the same expenditure incurred by a married couple from joint property cannot be counted again as operating costs.
Re-depreciation of the car in the activity undertaken after the break
The so-called the principle of continuing valuation and depreciation is included in Art. 22 g of paragraph 1. 13 point 1 of the PIT Act. It shows that after a break lasting no more than 3 years, an entity that undertakes a break shall make depreciation write-offs taking into account the current initial value of the fixed asset and the amount of the write-offs made, if the asset was entered in the fixed assets register before the break.
However, if the taxpayer, after the liquidation of the activity, starts to conduct business activity again after a period longer than 3 years, then the regulations contained in the above-mentioned provision will not apply. In such a situation, when re-entering a car used earlier in liquidated business activity in the fixed assets register, and then transferred for private purposes, it must be properly valued. The method of valuation depends on whether the taxpayer has proof of purchase of this car or not. The initial value is determined on the basis of:
vehicle purchase value based on an invoice, bill, sale and purchase agreement - if these documents exist,
based on market price - as long as there are no documents proving the starting value.
The value of the car determined in this way will be the basis for making monthly depreciation write-offs, which will reduce the amount of tax due to the tax office.