Principles of the valuation of fixed assets - it is worth knowing

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An entrepreneur accepting components classified as fixed assets for the company's condition should remember to determine their initial value in accordance with the provisions of the PIT Act. It is a very important issue, as the subsequent depreciation charges will be calculated on this value. Let's check what are the rules for the valuation of fixed assets resulting from the PIT Act.

Rules for the valuation of fixed assets acquired through purchase

According to Art. 22 g of paragraph 1. 1 point 1 of the PIT Act, fixed assets acquired for consideration are measured at the purchase price.

Art. 22g sec. 3 specifies what the taxpayer should understand by the purchase price. We can present this definition using the formula:

purchase price + costs related to the purchase accrued until the day of putting ŚT into use + customs and excise duty (in the case of import) + non-deductible VAT = purchase price

The purchase price should be understood as the amount due to the vendor expressed on the purchase document, e.g. a VAT invoice, sale and purchase agreement. Importantly, in the case of active VAT payers purchasing a fixed asset based on a VAT invoice, the purchase price will, in principle, be the net amount. In turn, in the case of entities exempt from VAT, it will be a gross amount.

However, when it comes to costs related to the purchase, which are part of the purchase price and thus increase the initial value of a fixed asset, they include, among others:

  • transport costs,

  • loading and unloading costs,

  • insurance costs on the way,

  • assembly and installation costs,

  • notary, tax and other fees,

  • interest,

  • commissions.

Important!

According to Art. 22 g of paragraph 1. 8 of the PIT Act, if it is not possible to determine the purchase price of fixed assets or their parts acquired by taxpayers before the date of establishing the register or drawing up a list, the initial value of these assets is assumed in the amount resulting from the valuation made by the taxpayer, taking into account the market prices of fixed assets of the same type from December of the year preceding the year in which the records were established or the list was prepared, as well as the state and degree of their wear.

Example 1.

On January 29, 2017, the entrepreneur purchased a production machine from a domestic contractor, on a VAT invoice, where:

  • net value: PLN 15,000

  • 23% VAT tax: PLN 3,450

  • gross value: PLN 18,450

For the machine to function properly, it had to be properly assembled. Therefore, the entrepreneur purchased the assembly service on 03/03/2017, for which he also received a VAT invoice:

  • net value: PLN 2,000

  • 23% VAT tax: PLN 460

  • gross value: PLN 2 460

How much will the initial value of the machine be when the entrepreneur purchasing it is an active VAT taxpayer, and how much will be the VAT-exempt entity? On what date can he enter it into the fixed assets register?

When the entrepreneur purchasing the machine is an active VAT payer and exercises the right to deduct VAT on the purchase of the machine and assembly services, the initial value will be the sum of the net value from the invoice for the purchase of the machine and the net value from the invoice for assembly, i.e. a total of PLN 17,000 (15,000 PLN + 2,000 PLN).

However, when the entrepreneur purchasing the machine is an entity exempt from VAT, the initial value will be the gross amounts from both invoices, i.e. PLN 20,910.

As the machine was fit for use only after it was properly assembled, the taxpayer should take the date of acceptance for use no earlier than March 3, 2017.

Valuation of fixed assets partially acquired for consideration

According to Art. 22 g of paragraph 1. 1 point 1a of the PIT Act, the initial value of a fixed asset acquired partially for consideration is the purchase price increased by the value of the revenue specified in art. 11 sec. 2b of the PIT Act.

Art. 11 sec. 2b of the PIT Act

J.If the benefits are partially payable, the taxpayer's income is the difference between the value of these benefits, determined in accordance with the principles set out in paragraph 2 or 2a, and the payment borne by the taxpayer.

Pursuant to Art. 11 sec. 2 and sec. 2a income from free benefits is determined for:

  1. Monetary value of benefits in kind - based on market prices used in the trade of things or rights of the same type and species, taking into account, in particular, their condition and degree of wear, as well as the time and place of obtaining them.

  2. Monetary values ​​of other free benefits are determined:

  • if the subject of the service are services falling within the scope of the economic activity of the service provider - according to prices applied to other recipients;

  • if the subject of the benefits are purchased services - according to the purchase price;

  • if the subject of the benefits is the provision of a flat or building - according to the equivalent of the rent that would be payable in the event of concluding a lease agreement for this premises or building;

  • in other cases - on the basis of market prices used in the provision of services or the provision of items or rights of the same type and species, taking into account in particular their condition and degree of wear and the time and place of making available.

Principles of valuation of fixed assets manufactured by the entrepreneur

Pursuant to Art. 22 g of paragraph 1. 1 point 2 in the case of a fixed asset manufactured on its own by the entrepreneur, its initial value shall be determined based on the cost of production.

The cost of production should be understood as the value, at the purchase price, of fixed assets used to produce:

  • tangible assets i

  • used third party services,

  • costs of remuneration for work along with derivatives,

  • other costs that can be included in the value of manufactured fixed assets.

It should be emphasized that the cost of production does not include:

  • the value of the taxpayer's own work, his spouse and minor children,

  • general management costs,

  • selling costs and other operating costs and financial operations costs, in particular interest on loans (credits) and commissions, excluding interest and commissions accrued until the date of putting the fixed asset into use.

Important!

When the taxpayer cannot determine the cost of production, the initial value is determined in the amount determined taking into account the market prices of fixed assets of the same type in December of the year preceding the year of establishing the records or drawing up the list, and the condition and degree of their wear. The valuation is made by an expert appointed by the taxpayer.

Valuation of fixed assets acquired through inheritance and donation

The issue of valuation of fixed assets acquired by inheritance or donation is regulated in Art. 22 g of paragraph 1. 1 point 3 of the PIT Act. According to its contents, the initial value is the market value as at the date of purchase, unless the donation agreement or the free transfer agreement specifies this value at a lower amount.

Importantly, if you receive a donation or inheritance, you must report on the SD-Z2 form and pay the donation tax. It should be emphasized that donations from persons included in tax groups I and II are tax-free.

Tax group I: spouse, ascendants (including parents, grandparents), descendants (including children, grandchildren), stepson, stepmother, stepfather, siblings, son-in-law, daughter-in-law, mother-in-law.

Tax group II: descendants of siblings (children of a sister or brother), siblings of parents (aunts, uncles), descendants and spouses of stepchildren, spouses of siblings and siblings of spouses, spouses of siblings of spouses, spouses of other descendants (husband of a granddaughter or wife of a grandson).

Simplified valuation rules for buildings and residential premises

The taxpayers should pay particular attention to Art. 22 g of paragraph 1. 10 of the PIT Act, in accordance with its content, the initial value of residential buildings or residential premises can be determined:

  • rented,

  • leased,

  • used by the owner for the purposes of his business activity

- assuming in each tax year the value being the product of square meters of the usable area of ​​the building or premises rented, leased or used by the owner and the amount of PLN 988, while the usable area is the area assumed for real estate tax purposes.

When deciding on this method of valuation, the entrepreneur should carefully analyze whether the initial value determined in this way will be optimal for the taxpayer. In the event that the initial value determined on the basis of the purchase document would be higher than in the case of the simplified valuation of buildings and residential premises, it is worth considering whether it is better to apply the valuation on the basis of general principles. Then, such a method of determining the initial value will allow for an increase in tax deductible costs through higher depreciation charges and a reduction in the PIT tax base.

Principles of valuation of fixed assets constituting joint ownership

In the case of fixed assets constituting joint ownership of the entrepreneur, the principles set out in Art. 22 g of paragraph 1. 11 of the PIT Act.

An entrepreneur who is a co-owner of an asset that is to be entered into the company's fixed assets, determines the initial value in proportion to the share in joint ownership.

Important!

The above rule does not apply to assets constituting joint property of the spouses, unless the spouses use the asset in separate economic activities.

What expenses do not increase the initial value of the fixed assets?

It should be remembered that the initial value of fixed assets is not increased by such expenses as:

  • costs of property insurance, civil liability, comprehensive insurance, accident insurance, etc. (apart from the costs of insurance on the way - these increase the initial value),

  • extended guarantees,

  • contractual penalties.