Depreciation (amortyzacja) of business assets is one of the most important elements of tax accounting for every business owner in Poland. Calculating depreciation charges correctly lets you settle the cost of buying fixed assets systematically, which directly affects the amount of income tax. Understanding the rules of depreciation is key to managing the company's finances effectively and optimising its tax burden.
Tax law regulates in detail how depreciation is calculated and sets the conditions that business assets must meet before depreciation charges can be made on them. Applying these rules incorrectly can lead to problems with the tax authorities and the need to correct your tax settlements.
Depreciation charges can be tax-deductible costs (koszty uzyskania przychodu, KUP) only if they have been calculated in line with tax law. Calculating depreciation incorrectly may lead the tax office (urząd skarbowy) to refuse to recognise the costs and require you to pay the extra tax with interest
Basic rules for depreciating business assets
Business assets can be depreciated in several ways, depending on the initial value of the asset and the cost settlement strategy chosen by the business owner. The most common method is monthly charges in equal instalments, which spread the purchase cost systematically over the entire period of use of the fixed asset.
The key threshold that decides how an asset is depreciated is an initial value of PLN 10,000 (since 1 January 2018, previously PLN 3,500; Article 22d(1) and Article 22f(3) of the PIT Act, Article 16d(1) and Article 16f(3) of the CIT Act). Assets with an initial value above this amount must be depreciated, while those worth up to PLN 10,000 can be depreciated in one go or charged directly to costs in the month they are put into use.
For active VAT taxpayers, the PLN 10,000 threshold applies to the net value of the asset. For persons exempt from VAT (without the right to deduct), the threshold refers to the gross value, because VAT is then included in the purchase price (Article 22g(3) of the PIT Act), which can significantly affect how purchases are settled
Under the tax act, a fixed asset is an asset purchased or produced in-house that is owned or co-owned by the taxpayer. An important condition is that on the day it is put into use it must be complete and fit for use, which means it can be used as intended without further outlays.
Charges can also be made in equal quarterly instalments or once at the end of the tax year (Article 22h(4) of the PIT Act), depending on the business owner's choice and the nature of the business. The choice of depreciation method affects how costs are spread over time and can be used to optimise the tax burden.
Business assets subject to depreciation
Tax law sets out precisely which business assets can be depreciated. The basic group consists of buildings, structures and premises constituting separate property, which are depreciated over many years because of their value and long useful life.
Another important category is machinery, equipment and means of transport, which are the basic working tools in most businesses. These assets have different periods of use and depreciation rates, depending on their type and purpose.
Other items with an expected useful life of more than one year, used by the taxpayer for the needs of their business, are also subject to depreciation. These can also be assets made available for use under a rental, lease or leasing agreement
A special category consists of business assets that are depreciated regardless of their expected period of use. These include:
- Investments in third-party fixed assets, which cover outlays incurred to improve or adapt someone else's assets
- Buildings and structures built on someone else's land, which are depreciated even though the land is not owned
- Assets not owned by the taxpayer, used under a leasing agreement, provided that the depreciation charges are made by the user
Classifying business assets for depreciation purposes requires a detailed analysis of their nature, how they are used and the legal basis for their use. Incorrect classification can lead to incorrect depreciation and problems with settling tax-deductible costs.
Differences between improving and repairing a fixed asset
Distinguishing between improving and repairing a fixed asset is fundamental to correctly settling the costs of maintaining and modernising business assets. Each type of work is treated differently for tax and accounting purposes.
Improving a fixed asset covers reconstruction, extension, rebuilding, adaptation or modernisation that increases its functionality, efficiency or usable value. For tax purposes, there is an improvement when the total of such expenses in a given tax year exceeds PLN 10,000 and increases the usable value (Article 22g(17) of the PIT Act, Article 16g(13) of the CIT Act). Expenses on improvement cannot be charged directly to tax-deductible costs; instead, they increase the initial value of the fixed asset.
Improving a fixed asset increases its initial value and is settled through monthly depreciation charges. However, it does not affect the depreciation method chosen earlier – if the asset was depreciated using the declining balance method, you must continue to use that method, but from the increased initial value
Under the construction law, a repair is building work carried out in an existing structure to restore its original condition, and it is not routine maintenance. Building products other than those originally used may be applied, as long as this does not change the nature and function of the fixed asset.
The key difference is how the costs are settled. Expenses on a repair that restores the original condition of a fixed asset changed through use go directly to tax-deductible costs on the date they are incurred, regardless of the amount.
| Type of work | Effect on initial value | How it is settled | Effect on depreciation method |
|---|---|---|---|
| Improvement | Increases initial value | Depreciation charges | Method unchanged |
| Repair | No effect | Directly to costs | No effect |
| Modernisation | Increases initial value | Depreciation charges | Method unchanged |
| Maintenance | No effect | Directly to costs | No effect |
Depreciation of investments in third-party fixed assets
Investments in third-party fixed assets are a special category of outlays that require separate treatment for depreciation. These are outlays on someone else's fixed asset used for the business under a rental, lease or similar agreement.
A characteristic feature of investments in third-party fixed assets is that they are depreciated regardless of how long they are used. This means that even if the outlays are incurred shortly before the rental agreement ends, they are still depreciated at the rates set by law.
Buildings or structures built on someone else's land are owned by the investor, so they are not treated as an investment in a third-party fixed asset. This important difference affects how such investments are depreciated and how the related costs are settled
Depreciation charges on investments in third-party fixed assets can be made in two ways: using the standard depreciation rates or by setting individual depreciation periods. The choice depends on the nature of the investment and the taxpayer's preference.
For investments in third-party buildings, premises or structures, the depreciation period cannot be shorter than 10 years. This is the minimum period that must be applied regardless of the actual duration of the rental or lease agreement.
For investments in third-party fixed assets classified in groups 3-6 and 8 of the Classification of Fixed Assets (Klasyfikacja Środków Trwałych, KŚT), the depreciation periods vary depending on the initial value:
- 24 months – if the initial value does not exceed PLN 25,000
- 36 months – if the initial value is above PLN 25,000 and does not exceed PLN 50,000
- 60 months – in other cases
For investments in third-party means of transport, including passenger cars, the depreciation period cannot be shorter than 30 months. This rule aims to standardise the approach to depreciating vehicles used in business.
Expenses on adapting a third-party fixed asset to the needs of the business must result in its improvement in order to be settled in tax-deductible costs through depreciation charges. Ordinary operating expenses cannot be treated as investments
An important rule is that if the rental, lease or similar agreement is shorter than the depreciation period, the charges end in the month in which the investment was liquidated, sold or handed over to the owner after the agreement ended (Article 22h(1) point 1 of the PIT Act). How the undepreciated part is settled depends on what happens to the outlays (for example, the owner reimburses their value, they are left free of charge, or they are liquidated), so it is worth agreeing this before the agreement is terminated.
Undepreciated value when a fixed asset is liquidated
Depreciating fixed assets means making depreciation charges systematically over the entire period of use, until the total of the charges equals the initial value of the asset. In business practice, however, a fixed asset is sometimes withdrawn from use before it has been fully depreciated.
Early liquidation of a fixed asset may be necessary for various reasons, such as destruction as a result of a breakdown, accident or force majeure, sale due to a change in the business profile, or simply loss of economic usefulness. In each of these cases, the undepreciated part of the value must be settled correctly.
The undepreciated part of the value of a fixed asset removed from the company's register can be a tax-deductible cost if the liquidation is properly documented – in practice with a liquidation report. This document should contain detailed information about the reasons for and circumstances of the liquidation
The procedure for liquidating a fixed asset requires appropriate documentation to confirm that charging the undepreciated value to tax-deductible costs is justified. The liquidation report should contain information about the technical condition of the asset, the reasons for withdrawing it from use and how it was disposed of or sold.
Expenses incurred to liquidate a fixed asset can also be a tax-deductible cost. These include, among others, the costs of dismantling, transport, scrapping a destroyed machine or other expenses directly related to the liquidation. These costs are settled when they are incurred.
A manufacturing company had a machine with an initial value of PLN 100,000, which was 60 percent depreciated. As a result of a breakdown, the machine was completely destroyed and had to be liquidated. The undepreciated value of PLN 40,000 was charged to tax-deductible costs after the liquidation report was drawn up, and the additional dismantling and disposal costs of PLN 5,000 were also recognised as a tax-deductible cost.
The undepreciated value of a liquidated fixed asset can be a tax-deductible cost only if the liquidation is not related to a change in the type of business activity. A loss on the liquidation of a fixed asset that has lost its economic usefulness as a result of a change in the type of business is not a cost (Article 23(1) point 6 of the PIT Act, Article 16(1) point 6 of the CIT Act)
Pay particular attention to situations where a fixed asset is sold before it has been fully depreciated. In such cases, the income is the sale price, and the tax-deductible cost is the undepreciated value, i.e. the purchase expenses less the charges made (Article 23(1) point 1 of the PIT Act, Article 16(1) point 1 of the CIT Act). The difference between them is a profit or a loss, depending on which of these values is higher.
Depreciation methods and how to use them
Choosing the right depreciation method has a significant effect on how costs are spread over time and can be used to optimise the company's tax burden. Tax law provides for several depreciation methods, of which the most commonly used is the straight-line method, which means making equal charges over the entire depreciation period.
The straight-line method is simple to use and makes costs predictable, which makes it a popular choice among business owners. The monthly depreciation instalment is constant over the entire period of use of the fixed asset, which makes financial planning and budgeting easier.
An alternative to the straight-line method is the declining balance method, which allows higher depreciation charges in the first years of using the fixed asset. This method can be advantageous for business owners who want to recover their outlays faster and reduce their tax burden in the initial period.
The choice of depreciation method is binding and cannot be changed while a given asset is being depreciated. This means that the decision to use a particular method must be well thought out and aligned with the company's long-term financial strategy
The one-off method can be used for business assets with an initial value not exceeding PLN 10,000. It lets you charge the entire value of the asset to tax-deductible costs in the month it is put into use or in the following month (Article 22f(3) of the PIT Act). More expensive fixed assets can be written off in one go only in special cases: small taxpayers and those starting a business – assets in groups 3–8 of the Classification of Fixed Assets (excluding passenger cars) up to EUR 50,000 of charges a year as de minimis aid (PLN 213,000 in 2026, PLN 219,000 from 1 January 2027; Article 22k(7)), and all business owners – brand-new assets in groups 3–6 and 8 up to PLN 100,000 a year (Article 22k(14)).
For some types of fixed assets, the law provides special depreciation rules that may differ from the standard methods. This applies, among others, to passenger cars: from 2026, charges are a tax-deductible cost only on the value up to PLN 100,000 (CO2 emissions of at least 50 g/km), PLN 150,000 (below 50 g/km) or PLN 225,000 (electric and hydrogen cars) – Article 23(1) point 4 of the PIT Act, Article 16(1) point 4 of the CIT Act. Low-value assets have their own rules as well – we cover them in our article on depreciation of fixed assets up to PLN 10,000.
Depreciation documentation and records
Correct documentation and records of depreciation are the basis for settling tax-deductible costs and are essential during inspections by the tax authorities. Every business owner must keep a detailed fixed asset register containing all the information needed to calculate depreciation correctly.
The fixed asset register should contain at least the following information: the name and description of the asset, the date of purchase or production, the date it was put into use, the initial value, the depreciation method used, the depreciation rate, the depreciation charges made so far and the undepreciated value. How these charges translate into a lower tax bill is shown in our piece on depreciation as a way to lower your tax.
Documents confirming the purchase of fixed assets, such as invoices, contracts or acceptance reports, must be kept for the entire depreciation period, and then until the tax liabilities expire for the years in which the charges reduced the tax – as a rule 5 years from the end of the year in which the tax payment deadline passed (Article 86 § 1 and Article 70 § 1 of the Tax Ordinance Act (Ordynacja podatkowa)). Losing these documents may make it impossible to prove your right to the depreciation charges
Pay particular attention to documenting all changes to fixed assets, such as improvements, repairs, transfers between departments or changes in how they are used. Each such change should be properly documented and reflected in the register.
For fixed assets used partly for business and partly for private purposes, you need to determine and document the extent of business use – for example, for real estate or premises, charges are calculated in proportion to the floor area used in the business (Article 22f(4) of the PIT Act).
Modern accounting systems offer advanced fixed asset management modules that automate the calculation of depreciation and the generation of reports. Using such tools can make keeping the register much easier and reduce the risk of errors in settlements. Our accounting firm in Warsaw can also keep the asset register and post the charges for you.
