Sale of a fixed asset in suspended economic activity

The entrepreneur has the option to suspend his business for a maximum of 24 months. During suspension, it cannot perform activities related to its main profile of operation, but can it perform other activities that have tax consequences?

By suspending the activity, the entrepreneur decides not to perform activities related to its conduct. Therefore, it will not perform services during the suspension period and will not sell goods. The provisions of the Act on the freedom of economic activity, however, leave the person conducting the activity certain rights to perform certain activities during the suspension. And so the entrepreneur during the suspension period:

• has the right to perform all activities necessary to maintain or secure the source of income;
• has the right to accept receivables or the obligation to settle liabilities arising before the date of suspension of business activity;
• has the right to sell its own fixed assets and equipment;
• has the right or obligation to participate in court proceedings, tax and administrative proceedings related to business activity performed before the suspension of business activity;
• performs all obligations prescribed by law;
• has the right to earn financial income, also from activities carried out before the suspension of business activities;
• may be inspected on the terms provided for entrepreneurs engaged in business activity.

In accordance with the above, an entrepreneur who has suspended his activity cannot sell services and commercial goods, but has the right to sell fixed assets belonging to his activity. The sale of the fixed asset will generate income in the personal income tax. It may also cause a cost at the same time, because the non-depreciated part of a fixed asset during its sale constitutes a tax cost. Additionally, active VAT payers may be required to provide VAT due when selling a company item. Then, despite the fact that during the suspension period, they are not obliged to submit periodic declarations, while the sale of the fixed asset will take place despite the suspension of activity, they are obliged to submit a VAT-7 or VAT-7K declaration for the period in which the company item was sold.

On the other hand, when it comes to the obligation related to the advance payment of personal income tax, when selling a fixed asset during the suspension of activity, the entrepreneur is not obliged to pay advance payments for the fact that he has made this sale. The income may be settled in the first month after the suspension, or if the suspension covers the turn of the year, the income from the sale of the fixed asset during the suspension is shown in the annual tax return. The suspension of the activity does not release the entrepreneur from the obligation to submit the annual settlement.