Poland: Real estate companies, balance sheet valuation vs. tax deductible depreciation

Changes to the provisions governing the treatment of tax depreciation by real estate companies

Changes to provisions governing treatment of tax depreciation by real estate companies

The Ministry of Finance announced that real estate companies that perform asset valuations based on market price or otherwise determined at fair market value—and consequently that do not claim depreciation write-offs in line with the accounting provisions—are not eligible to claim tax-deductible depreciation write-offs for corporate income tax and individual (personal) income tax purposes.

Summary

Changes to the provisions governing the treatment of tax depreciation by real estate companies became effective on 1 January 2022. According to amended Article 15(6) of the corporate income tax law, tax-deductible costs are allowed as write-offs from fixed assets and intangible assets (i.e., depreciation write-offs). However, regarding qualifying real estate companies, write-offs related to fixed assets included in the group one (real estate) classification cannot be greater than the depreciation or amortization write-offs for fixed assets, made pursuant to the accounting regulations and charged to the entity's financial result for the tax year.

In response to an article published in Dziennik Gazeta Prawna (DGP), the Ministry of Finance stated that qualifying real estate companies that disclose real estate as an investment asset in their balance sheets at fair market value and, consequently, do not claim depreciation write-offs pursuant to the accounting provisions, are not eligible to claim tax-deductible depreciation write-offs for corporate income tax and individual income tax purposes. 

Read a February 2022 report prepared by the KPMG member firm in Poland

 

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