Fixed assets play a key role in the asset structure of every entity – both from an accounting and tax perspective. Here is an overview of the most important rules concerning fixed assets.

What is a fixed asset? 

According to the Polish Accounting Act, a fixed asset is a tangible asset that: 

• has an expected useful life longer than one year, 
• is complete and fit for use, 
• is designated for the entity’s operations. 

Examples include: 

• real estate (land, buildings, cooperative rights), 
• machinery, equipment, vehicles, 
• improvements on third-party fixed assets, 
• biological assets. 

Sale of a fixed asset 

The sale is recognized in other operating income and expenses: 

• revenue from sale, 
• derecognition cost (including depreciation and any unamortized value), 
• VAT due. 

VAT: 

The sale is considered a taxable supply of goods under the VAT Act and is subject to VAT. 

Derecognition of a fixed asset 

Fully depreciated asset: 

• Debit 070 / Credit 010. 

Not fully depreciated: 

• Depreciation: Debit 070 / Credit 010, 
• Net unamortized value: Debit 761 / Credit 010. 

Disposal of a fixed asset 

Assets could be disposed of due to: 

• physical wear and tear, 
• damage or obsolescence, 
• natural events, 
• change in business operations. 

Stages of disposal: 

1. Accounting disposal – withdraw from use. 
2. Physical disposal – e.g., dismantling. 

According to Polish National Accounting Standards 11 disposal can also include: 

• physical destruction, 
• removal from accounting records, 
• reuse in another asset. 

Documentation and accounting for disposal of a fixed asset

• LT document: The management has to approve the internal LT form (Likwidacja środka trwałego) to document the disposal.

• Accounting: 

Net book value → Debit 761, 

Asset transferred to off-balance sheet → Account 090. 

Improvements vs. repairs

• Repair – regular expense, directly deductible. 
• Improvement – increases asset value, therefore it is added to cost and amortized. 

If the cost is 10 000 PLN or less the company can expense it immediately according to the CIT Act.

Improvements include reconstruction, extension, adaptation, modernization. 

Fully depreciated asset improvement: 

If improvement > 10 000 PLN: 

• increase the initial value, 

• resume depreciation using the same method and rate. 

Transfer between business activities 

As stated in the PIT Act, when a fixed asset is transferred between activities of the same owner: 

• continue with the original value and method, 

• previously recognized depreciation is retained, 

• fully depreciated assets cannot be re-depreciated.

If you need additional support in accounting and hr &payroll services contact us!

Text based on: https://poradnikprzedsiebiorcy.pl/-amortyzacja-srodka-trwalego-przekazanego-z-innej-firmy-jak-rozliczyc; https://www.jak-ksiegowac.pl/artykul.php?t=Srodki-trwale-na-przykladach-likwidacja-ulepszenie-oraz-sprzedaz&idc=239