Special types of tax deductible costs, part AND

In economic turnover, not all economic events constituting an expense for an enterprise can be directly recognized as tax deductible costs. There are situations in which there are specific types of costs which, in order to reduce income, must meet certain conditions. The most specific tax costs include, among others depreciation, forgiven bad debts and leasing.

Depreciation of fixed assets

According to the definition, fixed assets are tangible assets with an expected useful life of more than one year - complete, fit for use and used for the purposes of business operations. However, their purchase cannot be charged directly to tax costs. According to Art. 22 sec. 8 of the Personal Income Tax Act, deductible costs are write-offs for the consumption of fixed assets and intangible assets - depreciation write-offs - made only in accordance with Art. 22a-22o and taking into account art. 23.

Therefore, the purchase of fixed assets as well as intangible assets can be included in costs only on the basis of monthly depreciation write-offs, starting from the initial value determined when entering them into the records. The amount of the write-offs depends on the initial value and the depreciation method used.

The following items are amortized:

• structures, buildings and premises owned separately,
• machines, devices and means of transport,
• investments in foreign fixed assets accepted for use,
• a cooperative right to a business premises,
• copyright or related property rights,
• licenses.

Initial value

When entering an asset into the register of fixed assets, the necessary condition is to determine its initial value. In practice, it is nothing else than the purchase price plus the costs of obtaining a given asset or an intangible asset. Additional expenses may result from: costs of transport, loading and unloading, insurance during transport, notary, fiscal and other fees, which should be reduced by the VAT due. Importantly, the tax on goods and services, which is not deductible according to other regulations, will increase the initial value of assets.

If the fixed asset was manufactured internally, then the initial value should be defined as the sum of all costs incurred in its implementation. Therefore, they will be i.a. costs of raw materials and materials needed for its creation, employee remuneration, as well as expenses incurred for external services and other costs that can be qualified as the value of the manufactured fixed asset.

Admission to the register of fixed assets

Assets with a value below PLN 3,500 may be subject to one-off depreciation. Then, the acceptance of the asset for the fixed assets register should be made in the month in which its use began.

According to the current definition of depreciation, depreciation is the monetary consumption of an enterprise's fixed capital. Depreciation write-offs are made by systematically spreading the initial value over the expected depreciation period. As a rule, depreciation begins in the month following the acceptance of a fixed asset or an intangible asset for use. Completion of this process should not take place later than the end of the month in which the sum of depreciation charges is equalized with their initial value, or they were put into liquidation, sold or their shortage was found.

Depreciation methods

The taxpayer introducing a fixed asset to the company's assets may choose the depreciation method from among the four available:

• one-off: application of this method is possible only by small taxpayers and entrepreneurs starting business activity in a given tax year (they can make depreciation write-offs up to the amount of EUR 50,000). It consists in making one depreciation write-off covering the entire value of the asset;

• linear: the most frequently used method of depreciation of fixed assets, consisting in making equal and constant write-offs from the initial value of an asset;

• degressive: it consists of applying higher write-offs in the initial years of depreciation because the assumption of the method is that the utility of fixed assets declines with time;

• progressive: is the opposite of the degressive method, where depreciation increases with the lifetime of a given asset.

It is also worth remembering that the entrepreneur cannot use the degressive method and individual rates when depreciating intangible assets.