Settlement of the sale of a fixed asset financed with a subsidy

When starting a business, entrepreneurs often use various external sources of financing. The most popular ones are certainly subsidies, which are largely allocated to the purchase of equipment and fixed assets. In recent months, many doubts have arisen among taxpayers as to the correct settlement of the sale of a fixed asset financed with a subsidy.

Purchase of fixed assets financed with a subsidy

Pursuant to Art. 23 sec. 1 point 45 of the Personal Income Tax Act, taxpayers may not qualify as tax costs depreciation write-offs on fixed assets and intangible assets, the purchase of which was financed by a subsidy:

Write-offs for the consumption of fixed assets and intangible assets made, according to the principles set out in Art. 22a-22o, from that part of their value, which corresponds to the expenses incurred for the acquisition or production of these funds or intangible assets, deducted from the tax base with income tax or returned to the taxpayer in any form.

However, when the purchase of a fixed asset or intangible assets was only partially financed with a subsidy, depreciation charges will constitute a tax deductible cost, but only in the part that was settled with the entrepreneur's own funds.

Costs when selling fixed assets - general rule

Pursuant to Art. 23 sec. 1 point 1 of the Personal Income Tax Act shall not be deemed to be tax deductible expenses for the acquisition or self-production of fixed assets, including those included in the acquired enterprise or its organized parts. These expenses, updated in accordance with separate regulations, less the sum of the depreciation referred to in article 1. 22 h of paragraph 1. 1 point 1 updof, however, are a tax-deductible cost in the case of a paid sale of fixed assets, regardless of the time of their incurrence.

The current position on the sale of a fixed asset financed with a subsidy

So far, tax authorities have issued interpretations favorable to taxpayers, according to which the cost of obtaining revenues from the sale of a fixed asset was its unamortized initial value.

The confirmation of the above is the individual tax interpretation of the Director of the Tax Chamber in Warsaw of January 11, 2012, ref. No. IPPB5 / 423-1030 / 11-2 / AS:

(...) it should therefore be stated that in the present case, the cost of obtaining revenues from the sale of fixed assets partially financed from the SPOT program will be the value corresponding to the expenses incurred for their purchase (regardless of the source of their financing), i.e. the initial value resulting from the records fixed assets, reduced by the sum of the depreciation write-offs, regardless of whether these write-offs were recognized as tax deductible costs.

In the case of sale of fixed assets financed partly from EU funds and partly from the national budget, the taxpayer has the right to include the non-depreciated value as costs pursuant to Art. 16 sec. 1 point 1, which is a special provision. (...).

A similar position was adopted by the Director of the Tax Chamber in Łódź in the tax interpretation IPTPB1 / 415-99 / 12-2 / MD of April 26, 2012:

(...) As it results from the content of the submitted application, in 2010 the Applicant received funding from the Poviat Labor Office. A Citroen Berlingo car was purchased from the subsidy received and entered it into the fixed assets and intangible assets records. The applicant makes depreciation write-offs from the above-mentioned a fixed asset, including as tax deductible costs, depreciation write-offs from the part of the initial value not financed with a subsidy, while depreciation write-offs from the part that was financed with a subsidy are not included in tax deductible costs. In the near future, the Applicant plans to sell the above-mentioned car.

Bearing in mind the above, in the light of applicable law, it should be stated that the cost of obtaining income in the event of the sale of the car in question will be the initial value of the car reduced by the depreciation write-offs (both being tax deductible and not tax deductible). Thus, the entire unamortized part of the initial value of a fixed asset is tax deductible at the time of its sale (...).

Different position of some tax authorities

A breakthrough in this matter came when the interpretation with reference number ITPB1 / 415-7 / 13 / PSZ by the Director of the Tax Chamber in Bydgoszcz:

(...) The presented description of the future event shows that you obtained financial support in the form of funds for starting a business. Using the allocated funds, you purchased a fixed asset - a truck - which you entered into the fixed assets register and started calculating depreciation charges. Depreciation write-offs were not included in the tax deductible costs of the business activity conducted. On December 30, 2011, the car was sold.

When transferring the above considerations to the present case, it should therefore be stated that in the presented facts it is not possible to include the non-depreciated initial value of a fixed asset as tax deductible costs. The purchase cost in the described situation was not borne by you (...).

This position is repeated by the Director of the Tax Chamber in Bydgoszcz in subsequent interpretations (reference ITPB1 / 415-223 / 13 / PES of April 29, 2013):

(...) The presented description of the future event shows that you obtained financial support in the form of funds for starting a business. Using the allocated funds, you purchased a fixed asset - a passenger car - which you entered into the fixed assets register and started calculating depreciation charges. As tax deductible costs, you included only depreciation write-offs from the part of the car's value that was financed from your own funds.

When transferring the above considerations to the present case, it should therefore be stated that in the presented future event it is not possible to recognize the fully unamortized initial value of a fixed asset as tax deductible costs. In the part in which the purchase of the car was financed with a subsidy, the purchase cost in the described situation was not incurred by you, therefore the part of the unamortized initial value of the car, which was covered by the subsidy, may not constitute a tax deductible cost in the event of the sale of the car.

Tax deductible costs - on the date of sale - may include only the non-depreciated value of a fixed asset, to the extent in which the purchase of this fixed asset was financed from own funds. (...).

Sale of a fixed asset financed with a subsidy according to the Minister of Finance ...

In the opinion of the Minister of Finance, in the case of the sale of a fixed asset, the tax cost should be the cost of its acquisition, constituting its initial value, less the sum of depreciation write-offs, regardless of the source of its financing. Thus, it confirms the application of a solution favorable to taxpayers.