Renewable energy sources are enjoying enormous popularity, even among businesses. They enable lower electricity bills, independence from grid energy supplies, and reduced carbon dioxide emissions. Investments in renewable energy sources are becoming particularly important with the development of the ESG (environmental, social responsibility, and corporate governance) concept.
What does the purchase of a photovoltaic system look like from a tax perspective? Find out in today's article.
Expenditures incurred on a photovoltaic installation will constitute a tax-deductible expense for the entrepreneur. However, the question arises: will they constitute a tax-deductible expense at the time they are incurred, or will they be subject to depreciation? If they are subject to depreciation, will they be considered a fixed asset or an improvement to an existing fixed asset?
Fixed assets are the property or co-ownership of the taxpayer, acquired or produced independently, complete and fit for use on the date of acceptance for use:
- structures, buildings and premises that are separately owned,
- machines, devices and means of transport,
- other items
– with an expected period of use longer than one year, used by the taxpayer for the purposes of his business activity or put into use on the basis of a rental, lease or leasing agreement.
A photovoltaic installation can therefore be considered a fixed asset. However, the correct assignment to a category of the Classification of Fixed Assets may pose a challenge. A photovoltaic installation can be classified as group 3 of the KŚT (KŚT type 348) or group 6 of the KŚT (KŚT type 669). Classification in the correct category will have tax consequences. Fixed asset type 669 (Other non-industrial equipment) will be depreciated at a rate of 10%, while fixed asset type 348 (Other turbine sets and generating sets) will be depreciated at a rate of 7%. However, tax interpretations supported by the qualifications of the Center for Classification and Nomenclature of the Statistical Office indicate that micro-installations on buildings are subject to depreciation at a rate of 10%.
In some cases, it will also be possible to make a one-time depreciation write-off. Taxpayers in the tax year in which they commenced their business, as well as small taxpayers, may make one-time depreciation write-offs from the initial value of fixed assets classified in groups 3-8 of the Classification, excluding passenger cars, in the tax year in which these assets were entered into the register of fixed assets and intangible assets, up to an amount not exceeding the total value of these depreciation write-offs in the tax year.
In addition, taxpayers may make one-off depreciation write-offs from the initial value of purchased brand new fixed assets classified to groups 3-6 and 8 of the Classification in the tax year in which these assets were entered into the register of fixed assets and intangible assets, up to an amount not exceeding PLN 100,000 in the tax year.
Therefore, there is a wide range of options for one-off depreciation. Depending on the status of the entrepreneur and the condition of the planned installation, one-off depreciation of up to €50,000 or up to PLN 100,000 is possible.
It is also possible that a photovoltaic installation will not be treated as a separate fixed asset, but as an improvement to an existing fixed asset. This will occur if the installation is permanently attached to another fixed asset (building, structure) in a way that makes it impossible to dismantle the installation without damaging the structure of that fixed asset. Such an installation constitutes an improvement to the structure or structure and increases the initial value of that fixed asset. Depreciation is applied at the rate appropriate for the building or structure, regardless of whether it is connected to the photovoltaic installation.
The situation is different for ground-mounted photovoltaic farms. They cannot be considered a single fixed asset, and each device must be assigned to the appropriate category in the KŚT. A photovoltaic farm, in addition to the panels themselves, also consists of an inverter, fencing, monitoring, connections, and, increasingly, an energy storage system. This means that each of these components will constitute a separate fixed asset.
Photovoltaic panels and inverters can be classified as group 6 type 669 “Other non-industrial equipment” and depreciated at a 10% rate. Fencing is classified as group 2 type 291 “Other civil engineering structures, not elsewhere classified,” depreciated at a 4.5% rate. Monitoring can be classified as group 6 type 624 “Alarm and signaling devices” – depreciated at a 10% rate. Grid connections are classified as group 2 type 211 “Distribution network pipelines and telecommunications, power and distribution lines” – depreciated at a 10% rate. Energy storage devices can be classified as group 6 type 633 “Stationary electric battery batteries” – depreciated at a 20% rate.
In case of doubts regarding the assignment of a fixed asset to the Classification of Fixed Assets, you can ask the Classification and Nomenclature Centre of the Statistical Office in Łódź for an interpretation.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of July 29, 2024
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