Fixed assets, intangible assets, amortization
What are fixed assets?
According to the provisions of the PIT Act, fixed assets may be
2. buildings and premises which are a separate property,
3. machinery, equipment, means of transport and other objects,
Which meet the following conditions:
- are the property or co-ownership of the taxpayer,
- are acquired or produced on their own,
- are complete and fit for use on the day of admission,
- the expected period of their use should be longer than one year,
- the value of the asset exceeds PLN 3,500.
- must be used by the taxpayer for the purposes of his business or put into use for another entity under a lease or lease agreement.
If the above conditions are met, the taxpayer is required to recognize this asset in the register of fixed assets and intangible assets. Must keep records of fixed assets.
What is the Register of Fixed Assets?
A document that should contain in particular the following data:
1. Name and surname
2. Address and Taxpayer NIP
3. Give the year for which the records are kept
4. Order number and Date of purchase
5. Date of admission to use
6. Identify the document on the basis of which you can identify the acquisition
7. Determination of fixed assets or intangible assets
8. Symbol CFA (Classification of Fixed Assets)
9. Initial value
10. Depreciation rate
11. value of improvement
12. Updated initial value
13. Amortization Amortization Amounts for a given tax year and cumulatively for the period of making such write-offs
14. Date of liquidation of a fixed asset
15. Cause of liquidation of a fixed asset
What constitutes intangible assets?
According to Art. 22b paragraph. 1 of the PIT Act is acquired and is usable for economic use on the day of acceptance for use:
1. cooperative ownership rights to residential premises,
2. cooperative rights to the premises,
3. the right to a single family home in a housing cooperative,
4. Author or related property rights,
6. rights to inventions, patents, trade marks, utility models, ornamental patterns,
Purchase of fixed assets or intangible assets is not booked directly into the company costs, but is amortized.
What is depreciation?
It means that the settlement of expenditure on the purchase of fixed asset is spread over time.
Exception is one-off depreciation:
- fixed assets with a value not exceeding PLN 3,500
- Fixed assets up to the amount not exceeding € 50,000 (in 2016 amounted to PLN 212,000) in de minimis aid to taxpayers who:
* In the tax year they have started their business or
* Are small taxpayers.
Limit refers to the total value of these depreciation charges in a given tax year. Disposable depreciation in de minimis is depreciable on fixed assets classified in group 3-8 of Fixed Assets, excluding passenger cars.
What is de minimis relief for businesses with one-off amortization?
The taxpayer himself decides whether to use this type of depreciation. When making a one-off depreciation, the entrepreneur should obtain a certificate of use of this form of de minimis aid. To that end, you should apply to the appropriate head of the tax office to issue such a certificate and submit:
• document confirming the purchase of a fixed asset together with proof of payment,
• fixed assets,
• evidence of depreciation (for example copy of KPI);
• a statement of the depreciation method that would be adopted for a fixed asset if one depreciation was not applied,
• copies of the attestation or declaration of de minimis aid received during the current year and of the two preceding years, or where the taxpayer has not previously received such assistance, a declaration of non-receipt of de minimis aid during that period,
• information necessary to provide de minimis aid for the applicant and his business and the size and destination of the de minimis aid.
How to value the asset for depreciation?
The fixed asset used to be used should be measured, for example its initial value, which is the basis for the calculation of depreciation charges. The vast majority of fixed assets are valued according to the balance sheet and tax law that the initial value of fixed assets is determined in:
1. purchase price - for fixed assets purchased at home and abroad,
2. manufacturing cost - for self-produced,
3. market value - for a donation, unless the contract results in a price lower than market value,
Once set, the initial value can only be changed as a result of the asset improvement.
The taxpayer should increase it by purchasing costs accrued up to the date of transfer of the fixed asset for use, for example transportation, loading and unloading, road insurance, assembly, installation and commissioning of programs and computer systems, notary, tax and other fees, Commission. In the case of import, the purchase price also includes the duty and excise duty on the import of assets.
When can I depreciate a fixed asset?
Depreciation should begin from the month following the month in which the asset was entered in the fixed assets and intangible assets register and ended when the value of the depreciated write-downs was equal to the initial value of the asset. You can describe this by example:
In June 2016, the company adopted a passenger car worth PLN 30,000. The entrepreneur of the first depreciation amounted to PLN 500 in July 2016, for example calculated in such a way (30,000 x 20%) / 12 months. If the company does not sell this car before, it will make the last write off of depreciation in June 2021. Then the total value of depreciation for 5 years will reach 30 000 PLN.
The exception is when the asset is liquidated, disposed of, or is found to be in short supply. Then the last write-off should be made in the month of occurrence of one of the above events.
What are the types of fixed asset depreciation?
How are depreciation charges determined?
- 1. Linear depreciation is the most common and considered the simplest method of depreciation of fixed assets. The taxable person assumes that the wear of the fixed asset will be uniform throughout its life. The write-offs are fixed at a rate that should not change throughout the depreciation period.
2. Depressive depreciation means that the depreciation value changes because the yield of a fixed asset decreases with the time of its use. To use this method of depreciation, fixed assets of the taxpayer must be machines or devices that belong to the groups 3-6 and 8 classification of fixed assets. The degressive method also applies to all means of transport, except for passenger cars.
3. Natural method of depreciation - rarely used. It reflects the natural and physical wear and tear of a given asset. It assumes that the object's consumption is the same for each unit of work (for example art, kilogram, hour, etc.), so the amount of depreciation depends on the amount of work done in a given period of time.
All rates are included in Annex 1 of the PIT and CIT Act. These are again determined on the basis of the classification of fixed assets (classification of fixed assets).
What is a Classification of Fixed Assets (CFA)?
It is a systematized collection of fixed assets for accounting purposes, setting depreciation rates and statistical surveys. We distinguish ten single-digit groups of fixed assets classification:
1- buildings and premises and cooperative right to use premises and cooperative ownership to residential premises;
2- civil engineering objects;
3-boilers and power machinery;
4 machines, devices and apparatus of general use;
5 specialized machinery, equipment and apparatus;
6 - technical equipment;
7 - means of transport;
8-tools, instruments, movables and equipment, not classified elsewhere;
The aforementioned groups of fixed assets are divided into the second level of subdivision with two-digit symbols. Also introduced is the third division level, which is marked with three-digit symbols, fro example for trucks, the symbol KZT is 742.
The classification of CFA-2016 comes into force from 01.01.2017. However, the current classification, KET 2010, is still to be applied until the end of 2017 in tax matters, for personal income tax purposes (depreciation), in reports and for statistical purposes. There will be many minor changes, for example, the computer is classified as KSD 491, but after change will be KSD 487.
The current depreciation rates can be found at: http://www.wskazniki.gofin.pl/8,210,1,rokodo-stawki-amortyzacyjne.html
For example, cars have the symbol KKT 741, so for them the depreciation rate is 20% per year.
When amortization is not a cost?
- 1. If the passenger car is more expensive than the current limit of 20,000 EURO, converted into gold at the average euro exchange rate announced by the National Bank of Poland on the day the car is put to use. So when the taxpayer bought the car for 90,000 zł and the value of 20000 euros in exchange for PLN is 86152 zł (at the rate of 4.3076), the cost will not be a surplus of 3848 zł. Depreciation of 20% per year should be calculated from the amount of 86152 PLN.
2. If the purchase of a fixed asset was financed entirely from a grant
3. If the fixed asset was used for free use, the depreciation charge for these months is not applicable.