The restriction on real estate companies’ inclusion of depreciation write-offs on assets not subject to accounting depreciation in their tax-deductible costs has already been the subject of three rulings by the Supreme Administrative Court. In this article, we highlight the issues involved, as well as the existing case law, summarising the situation and the possible consequences for real estate companies.
What do the regulations say?
Regulations introduced in 2022 limited the amount of depreciation write-offs made by real estate companies on buildings and premises to the amount of such write-offs made under accounting regulations. Pursuant to Article 15(6) of the corporate income tax act, depreciation and amortisation of fixed assets and intangible assets (depreciation and amortisation write-offs) made in accordance with the provisions of the corporate income tax act are tax deductible, whereas in the case of real estate companies, write-offs relating to fixed assets classified in group 1 of the Classification of Fixed Assets (KŚT), i.e. buildings and premises, may not exceed in a tax year the depreciation or amortisation write-offs for the wear and tear of fixed assets made in accordance with accounting regulations, charged to the entity’s financial result in that tax year.
For taxpayers who are real estate companies, a particular problem is posed by all assets which, under accounting regulations, are treated as fixed assets, but could be depreciated in accordance with the provisions of the corporate income tax act.
What do the tax authorities indicate?
The Director of the National Revenue Information in individual interpretations uniformly interprets the aforementioned provision, emphasising that depreciation write-offs cannot be made for income tax purposes if they are not made for balance sheet purposes. This is confirmed, inter alia, by individual interpretations of 17 March 2025 (ref. 0114-KDIP2-1.4010.58.2025.2.KW), of 28 August 2024 (ref. 0114-KDIP2-1.4010.407.2024.1.DK), of 23 May 2024 (ref. no. 0114-KDIP2-1.4010.219.2024.1.DK) or of 3 January 2024 (ref. no. 0114-KDIP2-1.4010.649.2023.1.PK).
The tax authorities do not allow depreciation write-offs, e.g. on assets classified for balance sheet purposes as long-term investments, which puts real estate companies in a very unfavourable position. According to this approach, they basically have a choice between waiving depreciation write-offs for income tax purposes, which increases the amount of tax payable (or reduces losses), or change their accounting principles in order to make depreciation write-offs on specific assets, which in turn may prove undesirable from the financial and business perspective of such an entity.
What are the positions of the provincial administrative courts?
In most cases, provincial administrative courts disagreed with the interpretation presented by the tax authorities. In numerous verdicts in this regard, these courts emphasised that if a real estate company does not treat assets as fixed assets in accordance with accounting regulations and does not make depreciation write-offs on them, the limitation referred to in Article 15(6) of the Corporate Income Tax Act does not apply to these assets. This position was presented, inter alia, by the Provincial Administrative Court (WSA) in Gdańsk in its Verdict of 3 December 2024, ref. no. act I SA/Gd 681/24, WSA in Warsaw in its verdict of 12 September 2024, ref. act III SA/Wa 1424/24, or WSA in Poznań in its verdict of 10 February 2023, ref. act I SA/Po 789/22.
A different position was taken by the Provincial Administrative Court in Warsaw (e.g. in its verdicts of 4 April 2023, ref. no. III SA/Wa 2425/22 and of 12 January 2023, ref. no. III SA/Wa 1356/22), stating that the restriction indicated in Article 15(6) of the Corporate Income Tax Act applies to assets held by real estate companies regardless of whether they are subject to depreciation for accounting purposes or not. 6 of the Corporate Income Tax Act applies to assets held by real estate companies regardless of whether they are depreciated for accounting purposes or not. If, in accordance with accounting regulations, no such write-offs are made for a given asset, then the taxpayer is not entitled to recognise depreciation write-offs as tax-deductible costs for CIT purposes.
What position did the Supreme Administrative Court take?
In its first precedent-setting verdicts of 28 January 2025 (joint cases ref. nos. II FSK 1652/23, II FSK 788/23, II FSK 789/23, II FSK 987/23, II FSK 1086/23) concerning the issue in question, the Supreme Administrative Court did not confirm unequivocally whether the restriction in question applies in the cases indicated above. On the one hand, it agreed that real estate companies cannot be deprived of the right to make depreciation write-offs for CIT purposes if they do not make them from a balance sheet perspective, but that an additional restriction should apply here in determining their maximum amount. This refers to the hypothetical value of these write-offs determined in accordance with accounting regulations in a situation where they would be recognised as fixed assets from a balance sheet perspective, from which such write-offs would then be made.
It can therefore be concluded that, according to the interpretation presented in the above verdicts, regardless of the classification of assets for accounting purposes, real estate companies are entitled to recognise depreciation write-offs as tax-deductible costs, applying the limits resulting from the maximum amount of depreciation write-offs made from an accounting perspective. However, if such write-offs are not made, their hypothetical value should be calculated assuming that the asset in question is a fixed asset (contrary to the accounting policy adopted).
This position was not fully accepted by the Supreme Administrative Court in its verdicts of 5 March 2025 (ref. no. II FSK 896/23). On the one hand, it confirmed the favourable interpretation of Article 15(6) of the Corporate Income Tax Act, according to which the restriction in question should not apply to real estate companies in relation to assets for which no depreciation write-offs are made for accounting purposes. On the other hand, however, it did not agree with the need to compare economic operations in terms of tax and balance sheet treatment (i.e. to determine the hypothetical amount of depreciation write-offs for accounting purposes). The conclusions of the judgment in question, resulting from its oral justification, are therefore more favourable to taxpayers than those resulting from the January judgment of the Supreme Administrative Court.
A similar position was also taken by the Supreme Administrative Court in its judgment of 18 March 2025 (ref. no. II FSK 246/24), in which it confirmed in its oral justification that there is no need to apply a limitation on the recognition of tax-deductible costs of depreciation write-offs by real estate companies. At the same time, it did not address the need to set a maximum limit on depreciation write-offs, as implied by the conclusions of the Supreme Administrative Court’s verdict of 28 January 2025.
However, it is necessary to wait for more detailed information on the reasons for the oral conclusions raised by the Supreme Administrative Court in March 2025, as the written justifications for the rulings in question have not yet been published.
Possible consequences and further actions of real estate companies
Using the discussed verdicts of the Supreme Administrative Court, real estate companies may analyse their tax settlements related to depreciation write-offs on their real estate holdings. They may, among other things:
- include depreciation write-offs for previous years in their tax-deductible costs (i.e. as a rule, starting from 2022, when the wording of the discussed Article 15(6) of the Corporate Income Tax Act was amended) and apply for a tax refund in this respect,
- change their approach to current CIT settlements in accordance with the position presented by the Supreme Administrative Court,
- change the classification of certain assets from an accounting perspective if, due to the negative interpretation of the tax authorities, they decided to reclassify assets as fixed assets in order to avoid negative tax consequences.
However, it should be remembered that the current number of positive verdicts of the Supreme Administrative Court is not significant enough to speak of an established positive line of jurisprudence, and as practice shows, even if such a line exists, tax authorities are reluctant to change their established approach (in particular if it is pro-fiscal). For this reason, potential disputes in this area between taxpayers and tax authorities cannot be ruled out.
Summary
Currently, the Supreme Administrative Court is developing a line of jurisprudence on the issue of depreciation write-offs for assets that are not fixed assets under accounting regulations. So far, it has been favourable to taxpayers. It is to be hoped that the Supreme Administrative Court will not propose complicated solutions for determining the maximum limit of depreciation write-offs that can be included in tax-deductible costs (e.g. in accordance with the structure presented by the Supreme Administrative Court in its Verdicts of 28 January 2025, ref. no. II FSK 788/23 and others), and, on the other hand, that they will not adopt a different interpretation of the issue in question (as was the case with some of the positions previously presented by the Provincial Administrative Court in Warsaw).
