Supreme Administrative Court will resolve the doubts concerning the income from property sale

Administrative courts have no one unified opinion when it comes to considering the income from sale of a property performing business functions to be business income.

We sell property which performed business functions but was not included in the fixed asset account. Can it be considered as business income then? Administrative courts are not sure. Commissioner for Civil Rights Protection requested the Supreme Administrative Court for a clarification.

I think that we should take into consideration the literal interpretation, which, according to me, means that the income from the sale of those assets which were not included in the fixed asset account should not be treated as business income – says Łukasz Kosonowski, tax adviser, manager at MDDP Michalik Dłuska Dziedzic i Partnerzy.

The issue of taxation of the income from sales of a property, its part or shares, which performs business functions and is not included in the fixed asset account is treated inconsistently by administrative courts. Some courts believe that using certain assets to perform business functions - whether they are included in the fixed asset account or not – means that the income from selling those assets will be considered to be business income. On the other hand, some claim that aside from using the assets for business purposes they should also be included in the fixed asset account. Some courts are of the opinion that the fact of using to perform the function is enough, some believe it is not – says Łukasz Kosonowski.

It is worth mentioning that a businessperson can get many benefits form including the property in the fixed asset account. When assets are included in the fixed asset account, when they meet the definition of a fixed asset and are included in the account, then the tax payer can write off amortization which is the basic cost. It would also mean that correct are those administrative regulations according to which if an asset is not included in the fixed asset account then the income from its sale is not business income – says Łukasz Kosonowski.

Prof. Irena Lipowicz, the Commissioner for Civil Rights Protection, says that the sale of such a property is not business income. The Supreme Administrative Court can issue a decision which will resolve the doubts or it can refuse to undertake the case claiming that present tax regulations regarding the issue are clear.


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