Faster tax depreciation, withholding tax exemption at the purchase of place tickets – changes in CIT and PIT
On 12 August 2017 the Act amending the Personal Income Tax Act and the Corporate Income Tax Act of 7 July 2017 (Journal of Laws item 1448) entered into force. The new regulations give the possibility to make one-off depreciation charges of up to PLN 100,000 at the purchase of new property, plant and equipment and exempt the expenses for purchasing place tickets for passenger flights from withholding tax. The regulations are applicable to taxpayers liable to pay CIT as well as those liable to pay PIT
The new regulations introduced the possibility to make a one-off depreciation charge on the initial value of new property, plant and equipment classified under groups 3-6 and 8 in the tax year in which such assets were for the first time recorded in the register of property, plant and equipment and intangible assets, up to the amount not exceeding PLN 100,000 in a tax year. It must be noted that the amount of PLN 100,000 covers the sum of depreciation charges and a payment towards the purchase of an asset of property, plant and equipment which at the moment may be included under tax deductible costs (at the time of payment).
One-off depreciation is applicable for factory new and strictly specified property, plant and equipment – groups 3-6 and 8 of the Classification of Property, Plant and Equipment with the initial value of at least PLN 10,000. In the case of two assets, the total value should be at least PLN 10,000, and the initial value of each asset should exceed PLN 3,500.
The regulations give the possibility to include a payment made towards the purchase of the asset covered by the above rule under tax deductible costs, also up to the amount of PLN 100,000.
The taxpayer may choose the period in which he wants to make use of the one-off charge. The charge may be made no earlier than in the month in which the asset of property, plant and equipment is entered to the records of property, plant and equipment in equal instalments every month, in equal instalments every quarter or once at the end of the tax year.
Small taxpayers or those commencing business activity may take advantage of one-off depreciation pursuant to Article 16k paragraph 7 of the CIT Act and accordingly Article 22k paragraph 7 of the PIT Act (one-off depreciation of property, plant and equipment, including second hand assets, classified under groups 3-8 excluding passenger cars, up to the limit of EUR 50,000 on annual basis), as well as one-off depreciation introduced by the amendment, so if both options of faster depreciation are available at the same time, the taxpayer chooses which one he wants to use.
The regulations envisage the necessity to return the tax “benefit” obtained by the taxpayer in the form of inclusion of the payment towards the purchase of an asset of property, plant and equipment under tax costs. If the taxpayer has included the payment towards the purchase of an asset of property, plant and equipment under tax costs, and subsequently:
- wound-up the activity or changed the form of its taxation to lump-sum tax before purchasing that asset,
- after purchasing that asset, did not make a one-off depreciation charge on it or sold the asset against payment,
then the taxpayer will be obligated to increase revenues by the payment towards the purchase of the asset of property, plant and equipment, respectively, on the last days of carrying on the activity before winding it up, on the last day of carrying on the activity before changing the form of taxation, on the date of making the first depreciation charge in accordance with general principles, or on the date of sale of the asset against payment.
Every time before deciding to use the possibility to make a one-off depreciation charge, the taxpayer should consider whether the regulations discussed here will be beneficial for him. The effect of one-off depreciation is an increase in the tax costs, which may be detrimental for a taxpayer incurring a tax loss.
In addition, apart from changes in depreciation, also the regulations about withholding tax on revenues obtained by foreign air navigation enterprises on the Polish territory were changed, and namely the revenues from airline scheduled passenger transport were exempted from taxation, and the exemption is available on condition that a passenger has a plane ticket. So it is no longer needed to obtain a certificate of residence when using passenger scheduled flights in order to be exempted from withholding tax when buying a plane ticket.
The Act entered into force as of 12 August 2017, however, the regulations reading as stipulated in the amendment are applicable to property, plant and equipment acquired since 1 January 2017 and payments towards the purchase of such assets made since that date.
Agnieszka Jasica-Skalbmierska, Tax Advisor, ATA Finance