What can be depreciated separately from the building?

Question: The applicant is engaged in the sale and service of cars. In order to increase the space of the showroom and service, it is carrying out an investment aimed at extending the building housing the car showroom. In the building and on the roof and walls of the building, there will be, among others, the following assets: elements of internal and external equipment, ventilation and air-conditioning system, electrical installation, video system, elevators, external doors and entrance and garage gates. Is the above the assets constitute separate single or comprehensive fixed assets and as such may be subject to tax depreciation separately from the building?

INDIVIDUAL INTERPRETATION

Based on art. 13 § 2a, art. 14b § 1 of the Act of August 29, 1997 Tax Ordinance (Journal of Laws of 2019, item 900, as amended), the Director of the National Tax Information states that the Applicant's position presented in the application of May 16, 2019 (date of receipt May 16, 2019), supplemented by letter of July 18, 2019 (date of posting July 18, 2019, date of receipt July 19, 2019) and letter of July 17, 2019 (date of posting July 18, 2019, receipt date July 23, 2019) in response to the request of July 8, 2019 (shipping date July 8, 2019, delivery date July 11, 2019) for an interpretation of the tax law regarding tax income tax from legal persons in the scope of recognizing assets as single or comprehensive fixed assets and the possibility of their depreciation separately from the building in the case of:

1. Elements of internal equipment - correct,
2. Elements of external equipment - correct,
3. Oil monitoring system - correct,
4. Ventilation system and air conditioning - is correct,
5. Water and sewage system - is correct,
6. Lighting installation - is correct,
7. Fire protection system - is correct,
8. Electrical installation - correct,
9. Pneumatic installation - correct,
10. Exhaust exhaust system - correct,
11. Electric charger for electric cars - is correct,
12. Video system - is correct,
13. Elevators and passenger and goods lifts - is correct,
14. Raised floor system - is correct,
15. External and internal signage regarding the Company's business name and brands of cars sold, placed outside and inside the building - is correct,
16. External doors and entrance and garage gates - are correct.

On May 16, 2019, the local authority received the above-mentioned application for an individual interpretation regarding corporate income tax in the scope of recognizing assets as single or comprehensive fixed assets and the possibility of their depreciation separately from the building.

The application outlines the following future events.

The applicant [hereinafter also referred to as the Company] conducts business in the field of car sales and service. In order to increase the space of the showroom and service, the Company is carrying out an investment aimed at extending the building housing the car showroom. In connection with the ongoing investment in the building and on the roof and walls of the building, e.g. the following assets:

1. Elements of internal equipment Internal equipment including, among others, ceiling made of metal profiles and plasterboard; suspended ceiling; stretch ceiling - type B (lighting elements on an independent load-bearing structure - suspended under the ceiling of the building - removable); balustrades on internal staircases; automatic external and internal doors as well as entrance and garage gates (e.g. automatic sliding doors, entrance gate for cars from the south side), internal doors, internal windows, lighting - hanging lamps and lamps recessed into the suspended ceiling with accessories (e.g. power supply light sources, etc.), kitchen furniture, wardrobes with a profile, TV wall, reception desk; stairs in the living room - from level 0 to level +2 (representative stairs for customers on an independent structure fastened to the permanent elements of the building - they do not constitute a load-bearing element of the building), countertop fridge - cafeteria on level 0, fridge, dishwasher, sink, microwave oven, armature; bathroom equipment - fittings, cabin, toilet, washbasin, bathroom accessories, radiator; glazing of 7 consultation rooms, partition walls and doors. According to the Classification of Fixed Assets (Journal of Laws of 2010, No. 242, item 1622, hereinafter referred to as: Classification of Fixed Assets, KŚT), such elements are fixed assets from group 8 (tools, instruments, movables and equipment, not classified elsewhere).
2. Elements of external equipment External equipment including a balustrade on the roof of the building, ventilated facade - a decorative element made of perforated sheet fixed to the building, not constituting the building structure, roof over the entrance - an element not related to the building structure, related to the ventilated facade) - in According to the Company's assessment, in accordance with the Classification of Fixed Assets, such elements are fixed assets from group 8 (tools, instruments, movables and equipment, not classified elsewhere).
3. Oil monitoring system - according to the KŚT, this system is a comprehensive fixed asset with group 6 (technical devices).
4. Mechanical ventilation and air-conditioning system (ventilation/recuperation/air-conditioning system with air handling units, air-conditioning installation in the server room) - according to the KŚT, this system is a comprehensive fixed asset from group 6 (equipment technical).
5. Water and sewage installation, including in particular radiators, water heaters, radiators, bathroom fittings, toilet bowls, washbasins, bathroom accessories, urinals, urinal fittings, installation frames for urinals, washbasins, toilets - according to KŚT, this system is a comprehensive fixed asset from group 6 (technical devices).
6. Lighting installation - including in particular LED luminaires, emergency luminaires - according to KŚT, this system is a comprehensive fixed asset from group 6 (equipment technical).
7. Fire protection system - smoke detectors, fire buttons, fire warning devices, control elements, fire sirens, power supplies/batteries, smoke exhaust buttons, smoke vents, door actuators, rain/wind sensors, smoke vents - in accordance with with KŚT, this system is a comprehensive fixed asset from group 6 (technical equipment).
8. Electrical installation including, among others, trays - switchgear, wiring, cable trays with covers, handles/slings/anchors, fuse, mounting boxes, connectors and quick connectors, mounting bands, PVC mounting pipes - according to KŚT, this system is a comprehensive fixed asset from group 6 (technical devices) .
9. Pneumatic installation - according to KŚT, this system is a comprehensive fixed asset from group 6 (technical equipment).
10. Flue gas extraction system - according to KŚT, this system is a comprehensive fixed asset from the group 6 (technical devices).
11. Electric charger for electric cars (on the square in front of the building - for electric vehicles of customers) - according to the KŚT, in the opinion of the Company, each of the chargers can be separated as a separate fixed asset from group 4 (devices technical specifications).
12. Video system including 23 NEC monitors + server + software and audio system including 51 speakers + 9 amplifiers + 2 mixers + software - sound system for the facility in accordance with the requirements of the standard of the car brand sold by the Company - in accordance with KŚT this system is a comprehensive fixed asset from group 6 (technical equipment).
13. Elevators and elevators, in particular the W1 panoramic elevator (glazed passenger elevator - for customers serving the facility from level -1 to +3), elevator in the concrete shaft W2 - (a passenger lift for customers and employees between levels -1 to +3), a goods lift with service parts (to service the service warehouse - spare parts for service from level -1 to level 0),a freight car lift (supports vehicle exhibitions from level -1 to level +1) as well as glazing of the elevator shaft. According to the KŚT, lifts and passenger and goods lifts are fixed assets classified in group 6 (technical equipment).
14. The raised floor system, including, among others, independent structure of technical floor, modular and removable floor, as well as electric floor boxes and carpeting - according to KŚT, this system is a comprehensive fixed asset from group 6 (technical devices).
15. System of external and internal marking concerning the Company's company and brands of cars sold placed outside and inside the Building (in particular - a rotating star on the roof of the building and internal signage, signboards) - according to KŚT, this system is a comprehensive fixed asset from group 6 (technical devices).
16. External doors and gates entrance and garage doors (e.g. automatic sliding doors, entrance gate for cars, garage door). According to the Classification of Fixed Assets, the above-mentioned doors and gates can be classified into group 6, subgroup 66, type 669 - Other non-industrial devices.

All assets listed in the actual state of the application are the property of the Applicant and are/will be used for the needs related to the conducted business by the Company as a business activity after the building is put into use. The expected useful life of the assets is longer than one year. All the above-mentioned assets, together with any wiring, constitute complete and separable devices, fit for use in the form in which they were assembled. The assets in question have all the structural elements necessary for proper functioning as a whole in accordance with the intended use and were installed before the building was put into use. At the same time, taking into account the method of its installation in the building, it should be considered that the set of equipment elements is not permanently attached to the building, as it can be detached without damaging the building structure.

In light of the above description, the following questions were asked.

Are the assets listed in the facts of the application for interpretation in items 1 to 16 constitute separate single or comprehensive fixed assets and as such may be subject to tax depreciation separately from the building?

In the Applicant's opinion, the assets listed in the facts of the application for interpretation in items 1 to 16 constitute separate single or comprehensive fixed assets and as such are subject to tax depreciation separately from the building in accordance with the depreciation rate resulting from the List of depreciation rates.

According to art. 15 sec. 1 of the Updop, tax deductible costs are the costs incurred in order to achieve revenue or maintain or secure a source of revenue, with the exception of the costs listed in Art. 16 sec. 1 Upd. The definition formulated by the legislator is of a general nature. For this reason, each expenditure incurred by the taxpayer should be subject to individual analysis in order to make its legal classification. The only exception is when the act clearly indicates its affiliation to the category of tax deductible costs or excludes the possibility of including it in this type of cost.

In other cases, however, the existence of a causal relationship between the incurring of the cost and the generation of revenue or a real chance of generating tax revenue, or the preservation or securing of the source of obtaining them, should be examined. Pursuant to Art. 15 sec. 6 of the Tax Act, deductible costs are write-offs for the consumption of fixed assets and intangible assets (depreciation write-offs) made only in accordance with the provisions of Art. 16a-16m, taking into account art. 16. Regulation of art. 16a sec. 1 of this Act provides that depreciation is subject to art. 16c, owned or co-owned by the taxpayer, purchased or produced in-house, complete and fit for use on the date of acceptance for use:

- with an expected period of use longer than a year, used by the taxpayer for the needs related to his business activity or put into use on the basis of a rental, tenancy or contract referred to in Art. 17a point 1 updop, called fixed assets.

Taking into account that the depreciation of fixed assets is made using the depreciation rates specified in the List of depreciation rates (Article 16i of the Updop Act) constituting Annex No. 1 to the Act, which refers to the symbol of the Classification of Fixed Assets, it should be stated that the objective scope of fixed assets indicated in art. 16a sec. 1 above of the Act takes place in the Classification of Fixed Assets, which was introduced by the Regulation of the Council of Ministers of December 10, 2010 on the Classification of Fixed Assets (KŚT) (Journal of Laws of 2010, No. 242, item 1622, hereinafter: the Regulation). The Applicant would like to point out that he classifies fixed assets in accordance with the Regulation, because it applies in tax matters referred to in the CIT Act until December 31, 2017 (in accordance with § 2 section 1 of the Regulation of the Council of Ministers of October 3, 2016 on the Classification of Fixed Assets (KŚT) (Journal of Laws of 2016, item 1864). fixed assets are understood in the Classification of Fixed Assets as tangible fixed assets and their equivalents, with an expected economic useful life longer than one year, complete, fit for use and intended for the needs of the entity or put into use on the basis of a lease, tenancy or other agreement of a similar nature. In the Classification of Fixed Assets, a single element of fixed assets fulfilling specific functions in the process of manufacturing products and providing services is assumed as the basic unit of records. It can be e.g. a building, a machine, a motor vehicle, etc. Only in a few cases it is allowed to accept a single object in the records, the so-called a collective facility, which can be, for example, a set of pipeline conduits or a set of lamp posts of one type used in a plant, street, housing estate, computer units, etc.

To sum up: for the assets listed in Art. 16a sec. 1 of the Corporate Income Tax Act could be included in the taxpayer's fixed assets must meet the following conditions:

1. Interior fittings:

Equipment are elements of equipment fit for use in the form in which they have been installed. Each of the elements has structural features necessary for proper functioning as a whole in accordance with its intended purpose. At the same time, taking into account the way it is installed in the building, it should be considered that the set of equipment elements is not permanently attached to the building, as it can be detached without damaging the building structure. In the opinion of the Company, in accordance with the Classification of Fixed Assets (Journal of Laws of 2010, No. 242, item 1622, hereinafter: the Classification of Fixed Assets, KŚT), this set can be distinguished as a comprehensive fixed asset from group 8 (tools, instruments, movables and equipment, where not otherwise classified).

2. Elements of external equipment

External equipment consists of elements of equipment that can be used in the form in which it has been installed, e.g. balustrade or elevation. Each of the elements has the design features necessary for proper functioning as a whole in accordance with its intended use. At the same time, taking into account the method of mounting each of the elements outside the building, it should be considered that each of these elements is not permanently attached to the building, as it can be detached without damaging the building structure. In the Company's opinion, in accordance with the Classification of Fixed Assets, each of these elements can be distinguished as a fixed asset from group 8 (tools, instruments, movables and equipment, not classified elsewhere).

3. Oil monitoring system

The system is a comprehensive set of devices with wiring, ready for use in the form in which it will be installed. This system has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of its installation in the building, it should be considered that this system is not permanently attached to the building, as it can be disconnected without damaging the structure of the building, as well as the devices that make up the system. According to KŚT, this system is a comprehensive fixed asset from group 6 (technical equipment).

4. Ventilation and air conditioning system

The system is a comprehensive set of devices with wiring, ready for use in the form in which it will be installed. This system has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of its installation in the building, it should be considered that this system is not permanently attached to the building, as it can be disconnected without damaging the structure of the building, as well as the devices that make up the system. According to KŚT, this system is a comprehensive fixed asset from group 6 (technical equipment).

5. Water and sewage installation

The installation is a comprehensive set of devices that can be used in the form in which it will be installed. This system has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of its installation in the building, it should be considered that this system is not permanently attached to the building, as it can be disconnected without damaging the structure of the building, as well as the devices that make up the system. According to KŚT, this system is a comprehensive fixed asset from group 6 (technical equipment).

6. Lighting installation

The installation is a comprehensive set of devices that provide lighting for the building, usable in the form in which it will be installed. This system has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of its installation in the building, it should be considered that this system is not permanently attached to the building, as it can be disconnected without damaging the structure of the building, as well as the devices that make up the system. According to KŚT, this system is a comprehensive fixed asset from group 6 (technical equipment).

7. Fire protection installation

Fire protection installation is a set of devices used to protect a building against fire, i.e. a type of fire protection system. This system is a comprehensive set of devices that can be used in the form in which it will be installed. This system has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of installing this installation in the building, it should be considered that this system is not permanently connected to the building, as it can be disconnected without damaging the structure of the building, as well as the devices that make up the system. Considering the above, from the point of view of technical and operational criteria, and in particular the possibility of using the fire protection system after its possible disassembly, the devices should be considered complete and, consequently, fit for use. In the Company's opinion, in accordance with the KŚT, the fire protection device was classified as a comprehensive fixed asset in group 6 (technical equipment).

8. Electrical installation

Electrical installation is a comprehensive system consisting of a network of cables distributing or connecting individual devices with each other in order to ensure the supply and transmission of electricity in the building. This system is a comprehensive set of devices that can be used in the form in which it will be installed. This system has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of installing this installation in the building, it should be considered that this system is not permanently connected to the building, as it can be disconnected without damaging the structure of the building, as well as the devices that make up the system. Considering the above, from the point of view of technical and operational criteria, and in particular the possibility of using the fire protection system after its possible disassembly, the devices should be considered complete and, consequently, fit for use. In the Company's opinion, in accordance with the KŚT, the electrical installation was classified as a comprehensive fixed asset in group 6 (technical equipment).

9. Pneumatic installation

Pneumatic installation is a comprehensive set of devices that can be used in the form in which it will be installed. It has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of mounting this installation in the building, it should be considered that it is not permanently attached to the building, as it can be disconnected without damaging the structure of the building, as well as the devices that make up this installation. Considering the above, from the point of view of technical and operational criteria, and in particular the possibility of using the pneumatic system after its possible disassembly, the installation should be considered complete and, consequently, fit for use. In the Company's opinion, in accordance with the KŚT, this installation was classified as a comprehensive fixed asset in group 6 (technical equipment).

10. Exhaust extraction system

The flue gas extraction system is a set of devices used to remove harmful fumes from the building. This system is a comprehensive set of devices that can be used in the form in which it will be installed. This system has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of installation of this installation in the building, it should be considered that it is not permanently attached to the building, as it can be disconnected without damaging the structure of the building, as well as the devices that make up the system. Considering the above, from the point of view of technical and operational criteria, and in particular the possibility of using the flue gas extraction system after its possible disassembly, the devices should be considered complete and, consequently, fit for use. In the Company's opinion, in accordance with the KŚT, the flue gas extraction system was classified as a comprehensive fixed asset in group 6 (technical equipment).

11. Electric charger for electric cars

The charger is fit for use in the form in which it will be installed and has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the way it is installed in the building, it should be considered that it is not permanently attached to the building, as it can be detached without damaging the structure of the building, as well as the devices that make up the system. In the opinion of the Company, in accordance with the Classification of Fixed Assets, each of the loaders can be distinguished as a fixed asset from group 4.

12. video system

The system is a comprehensive set of devices with wiring, ready for use in the form in which it will be installed. This system has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of its installation in the building, it should be considered that this system is not permanently attached to the building, as it can be disconnected without damaging the structure of the building, as well as the devices that make up the system. According to KŚT, this system is a comprehensive fixed asset from group 6 (technical equipment).

13. Elevators and passenger and goods lifts

In the Company's opinion, in accordance with the KŚT, lifts and passenger and goods lifts are fixed assets classified in group 6 (technical equipment). This specification clearly suggests a possible separateness of the listed devices. The lift itself or a passenger/goods lift are complete devices that can be removed without damaging the building and these devices, and then also installed in other buildings, without changing their purpose. At the same time, the argument for separating the devices in question as fixed assets is the fact that they are an element that wears out faster than the building itself and also require more outlays for maintenance and ongoing repairs. The elevators and passenger and goods lifts installed in the building are complete and separable devices that can be used in the form in which they will be installed. They have all the structural elements necessary for proper functioning as a whole as intended. Considering the above, from the point of view of technical and operational criteria, and in particular the possibility of using these devices after their possible disassembly, the devices should be considered complete and, consequently, fit for use.

14. Raised floor system including e.g. stand-alone structure of the technical floor, modular and removable floor, as well as electrical floor boxes and carpeting.

The raised floor system is a set of equipment elements fit for use in the form in which it has been installed. This assembly has all the structural elements necessary for proper functioning as a whole as intended. At the same time, taking into account the method of its installation in the building, it should be considered that the set of equipment elements is not permanently attached to the building, as it can be detached without damaging the building structure. In the opinion of the Company, in accordance with the Classification of Fixed Assets (Journal of Laws of 2010, No. 242, item 1622, hereinafter: the Classification of Fixed Assets, KŚT), this set can be distinguished as a comprehensive fixed asset from group 8 (tools, instruments, movables and equipment, where not otherwise classified).

15. External and internal signage regarding the Company's company and the brands of cars sold, placed outside and inside the Building.

Each of these elements is fit for use in the form in which it has been installed and has all the design features necessary for proper functioning as intended. At the same time, taking into account the method of mounting these elements in and on the building, it should be considered that each of them is not permanently attached to the building, as it can be detached without damaging the building structure. In the opinion of the Company, in accordance with the Classification of Fixed Assets (Journal of Laws of 2010 No. 242, item 1622, hereinafter referred to as: Classification of Fixed Assets, KŚT), these elements can be classified as separate fixed assets from group 8 (tools, instruments, movables and equipment, where not otherwise classified). For example, a rotating star should be assigned to type 808 - Other tools, instruments, movables and equipment, not elsewhere classified.

16. External doors, entrance and garage gates

Assuming that the doors and gates are complete and fit for use, it is possible to dismantle them without detriment to the door and the building and install them in another building, they can be classified as a separate fixed asset.

According to the Classification of Fixed Assets, these devices can be classified into group 6, subgroup 66, type 669 - Other non-industrial devices. To sum up, all the assets described above can be considered separate fixed assets, because:

Taking into account the description of individual objects presented above, in the opinion of the Applicant, there should be no doubts about their classification as separate fixed assets from the point of view of both the criteria resulting from the regulations and the positions of the tax authorities. The Company's position has been confirmed by the tax authorities, for example, in the following interpretations:

In the light of the applicable legal status, the Applicant's position on the legal assessment of the presented future event in terms of recognizing the assets as single or comprehensive fixed assets and the possibility of their depreciation separately from the building in the case of:

According to art. 15 sec. 1 of the Corporate Income Tax Act (Journal of Laws of 2019, item 865, as amended, hereinafter referred to as "updop"), tax deductible costs are costs incurred to achieve revenue from a source of revenue or to maintain or secure sources of income, with the exception of the costs listed in Art. 16 sec. 1.

The tax deductible costs are therefore the expenses related to the business activity, excluding those reserved in the Act, as long as they are in a cause and effect relationship with the generated revenue or serve to maintain or secure the source of revenue.

The costs will be both tax deductible costs directly related to the obtained revenues and tax deductible costs other than costs directly related to revenues (remaining indirectly related) - if it is demonstrated that they were reasonably incurred in order to achieve revenues , even when, for objective reasons, the revenue was not achieved.

Therefore, the taxpayer has the right to include all costs, both directly and indirectly related to revenue, as long as they have been properly documented, except for costs recognized by law as not tax deductible. The taxpayer, including a given expense as tax deductible costs, should prove its connection with the business activity conducted and that the incurring of the expense has or may have an impact on the amount of revenue achieved or that the expense is related to a specific economic project.

In the light of the above, for an expense incurred by a taxpayer to be a tax deductible cost, the following conditions must be met:

Based on art. 15 sec. 6 of the updop tax deductible costs are write-offs for the consumption of fixed assets and intangible assets (depreciation write-offs) made only in accordance with the provisions of Art. 16a-16m, taking into account art. 16.

According to art. 16a sec. 1 updop, subject to art. 16c, owned or co-owned by the taxpayer, purchased or produced in-house, complete and fit for use on the date of acceptance for use:

1. structures, buildings and premises being separate property,
2. machines, devices and means of transport,
3. other items

- with an expected period of use longer than a year, used by the taxpayer for the needs related to his business activity or put into use on the basis of a rental, tenancy or contract referred to in Art. 17a point 1, called fixed assets.

This means that the fixed assets listed in points 1-3 of the above regulation will be subject to depreciation after the following conditions are met:

As it has already been indicated above, a fixed asset is subject to depreciation when it is complete and fit for use on the day it is put into use.

An asset meets the criterion of completeness if it is equipped with all structural elements enabling it to function as intended. The term "fit for use" means the possibility of actual and legal use.

According to art. 16f sec. 1 updop, taxpayers, with the exception of those who, due to the declared bankruptcy, do not conduct economic activity, make depreciation write-offs from the initial value of fixed assets and intangible assets referred to in art. 16a sec. 1 and sec. 2 points 1-3 and in art. 16b.

According to art. 16d sec. 2 the assets referred to in Art. 16a-16c, are entered into the register of fixed assets and intangible assets in accordance with Art. 9 sec. 1, at the latest in the month of putting them into use. A later date of entry shall be deemed to be a disclosure of the fixed asset or intangible asset referred to in Art. 16h sec. 1 point 4.

Based on art. 16f sec. 3 updop, depreciation write-offs are made in accordance with art. 16h-16m, when the initial value of a fixed asset or intangible asset on the date of acceptance for use is higher than PLN 10,000. If the initial value is equal to or lower than PLN 10,000, taxpayers, subject to Art. 16d sec. 1, may make depreciation in accordance with art. 16h-16m or once in the month of commissioning this fixed asset or intangible asset, or in the following month.

It should be noted that the limit for new fixed assets from PLN 3,500 to PLN 10,000 was increased by the provision of Art. 2 point 21 of the Act of October 27, 2017 amending the Personal Income Tax Act, the Corporate Income Tax Act and the Act on flat-rate income tax on certain revenues earned by natural persons (Journal of Laws of 2017 , item 2175, hereinafter referred to as the "amending act"), according to which the words used in Art. 16d in sec. 1, in Art. 16e in sec. 1 and 2, twice in Art. 16f in sec. 3, twice in Art. 16g in sec. 13 and in Art. 16k in sec. 9, the words "PLN 3,500" are replaced by the words "PLN 10,000".

At the same time, in the above-mentioned the amending act, the legislator included a transitional provision of Art. 11, which states that the provisions of (…) Art. 16d sec. 1, art. 16e sec. 1 and 2, art. 16f sec. 3, art. 16g sec. 13 and Art. 16k sec. 9 of the Act amended in Art. 2, in the wording given by this Act, shall apply to assets accepted for use after December 31, 2017.

As indicated by Art. 16h sec. 1 point 1 updop, depreciation write-offs are made from the initial value of fixed assets or intangible assets, subject to art. 16k, starting from the first month following the month in which this measure or value was entered into the records, subject to art. 16e, by the end of the month in which the sum of depreciation write-offs is equalized with their initial value or in which they were put into liquidation, sold or found to be deficient; the sum of depreciation write-offs also includes write-offs which, in accordance with Art. 16 sec. 1 is not considered tax deductible.

According to the content of art. 16i sec. 1 updop, depreciation write-offs on fixed assets, subject to art. 16j-16ł, shall be made using the depreciation rates specified in the list of depreciation rates and principles referred to in Art. 16h sec. 1 point 1.

The above provisions show that tax depreciation is a form of reducing tax costs spread over time with the value of items used in business activities that wear out over a period of more than 1 year (fixed assets). The depreciation period is usually close to the standard useful life of a given type of fixed assets, which is reflected in the depreciation rates indicated in the List of annual depreciation rates constituting Appendix 1 to the Corporate Income Tax Act. In order for a given asset to be classified as fixed assets, it must be owned or co-owned by the taxpayer.

The list of annual depreciation rates is attached as Appendix 1 to the Corporate Income Tax Act. Depreciation rates are assigned to fixed assets marked with symbols. Their development is included in the Classification of Fixed Assets, which is defined by the Regulation of the Council of Ministers of October 3, 2016 on the classification of fixed assets (Journal of Laws of 2016, item 1864), which is an executive regulation to the Act of June 29, 1995 on official statistics (Journal of Laws of 2019, item 649).

According to the definition presented in the above-mentioned of the regulation, the Classification of Fixed Assets (KŚT) is a systematic list of fixed assets (objects) used for recording purposes, determining the rates of depreciation and statistical research. In KŚT, a single element of fixed assets fulfilling specific functions in the process of manufacturing products and providing services is assumed as the basic unit of record. It can be a building, a machine, a motor vehicle, etc. Only in a few cases, it is allowed to accept a collective object as a single object in the records, which can be a set of pipeline conduits or a set of lampposts of one type used on the premises of a plant, street, housing estate, computer units, etc. .

It should be noted, however, that both the provisions of the above-mentioned of the Act on Public Statistics, as well as the regulation issued for its implementation, are not provisions of tax law, and consequently, in accordance with Art. 14b § 1 of the Tax Ordinance, may not be the subject of this interpretation.

The obligation to properly classify the fixed asset rests with the economic entity. This results from the announcement of the President of the Central Statistical Office of 24 January 2005 on the procedure for providing information on classification standards (Official Journal of the Central Statistical Office No. 1, item 11). In the event of difficulties in determining the correct classification, the interested entity may apply to the relevant Statistical Office, which provides information on the application of the above-mentioned classification standards.

Taking into account the description of the case and the tax law applicable in this respect, it should be pointed out that the basic criterion determining the classification of a given device (purchased or manufactured by the taxpayer) as a separate fixed asset is the issue of its completeness and fitness for use.

The provisions of the tax law do not explain what is meant by the term "complete and fit for use". In accordance with the rule of linguistic interpretation, according to which in a situation where the legislator did not assign a specific meaning to a given term, applying the statutory definition, its meaning should be assumed as it functions in common language.

In common language - according to the definition contained in the Dictionary of the Polish language of Wydawnictwo Naukowe PWN (www.sjp.pwn.pl) - the term "use" is synonymous with the term "use" and means, among others, "to use something as a means, a tool" and "to make use of something". From the above, it should be inferred that putting a fixed asset "for use" is closely related to its inclusion for use in the conducted business activity, after prior confirmation that it is complete and fit for use. An asset meets the criterion of completeness if it is equipped with all structural elements enabling it to function as intended. The term "fit for use" should be understood as the possibility of actual and legal use - after obtaining the appropriate permits and concessions. This means that on the date of acceptance for use, fixed assets should be objectively ready to be used by the taxpayer for the needs related to his business activity.

Such an understanding of the criteria of "completeness" and "fitness for use" is widely presented in the doctrine of tax law:

In the light of the above, it should be emphasized that an asset meets the criterion of completeness if it is equipped with all elements enabling its functioning in accordance with its intended purpose. On the other hand, the term "fit for use" should be understood as "possibility of actual and legal use". Thus, "complete and fit for use" does not mean that the assets must be able to work on their own.

The application shows that the Company has completed an investment project involving the extension of a building housing a car showroom. As a result of the investment, the facilities and equipment listed in points 1-16 were manufactured or purchased (installed). According to the description of the future event presented in the application, all facilities and devices listed by the Applicant in points 1-16 were purchased or manufactured by the Company on its own, are the property of the Company and will be used for business purposes for more than a year. In addition, as follows from the above-mentioned announcement of the President of the Central Statistical Office, the obligation to properly classify a fixed asset rests with the economic entity. The taxpayer must therefore be able to classify fixed assets into appropriate groups, subgroups and types. Therefore, assuming that all the facilities and equipment listed in the application are independent fixed assets, one should agree with the Applicant that each of these fixed assets (after qualifying for the appropriate type of KŚT) will be subject to depreciation at the appropriate rates specified in the List of annual depreciation rates constituting Appendix No. 1 to the Corporate Income Tax Act.

The Company's position, according to which the assets listed in the future event may constitute separate fixed assets and be depreciated independently on the principles set out in the Corporate Income Tax Act at the corresponding rates, should be considered correct.

Individual interpretation of July 31, 2019, ref. 0114-KDIP2-1.4010.314.2019.2.SP - Director of the National Tax Information

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Thematic keywords: corporate income tax (CIT), depreciation, individual interpretation, fixed asset