On 7 May 2025, the top Polish tax court (Supreme Administrative Court, or SAC) entered judgment in case number II FSK 1028/22, dismissing the tax authorities’ cassation appeal in a matter involving the retroactive reduction of tax depreciation rates, and upholding the judgment of the lower court (WSA Lublin) given on 6 May 2022 in case number I SA/Lu 91/22. SAC’s decision represents yet another confirmation of the line of authority that can be seen in previous case law, including judgments given by WSA Kraków on 9 Oct 2024 and on 11 Sep 2024 and by SAC on 3 Feb 2022.
The appellant was a company that wished to proceed under Article 16i(1) of the Corporate Income Tax (CIT) Act and reduce depreciation rates for selected tangibles (those that were or had been subject to tax depreciation) for which it had chosen straight-line depreciation. The reduction was meant to be down to any rate, even one close to zero, and apply retroactively to prior tax years as long as the tax from those years was still enforceable (limitation period still pending). The company requested a tax ruling on the matter.
The ruling authority held that the Company was not entitled to reduce depreciation rates, whether with respect to prior tax years or the current tax year in which it decided on the reduction. The authority argued that depreciation rates may only be changed at the beginning of each tax year after the current one, but not at any time.
The company appealed to the lower tax court which reversed the tax authority’s ruling on the ground that the company had the right to adjust its CIT-8 tax returns for years for which the tax was still enforceable (no statute of limitation applied). The court stated that the law allows depreciation rates to be reduced “as you go” or retroactively, meaning that the change may affect also prior reference periods.
The consistent approach of courts to the ability to reduce tax depreciation rates where straight-line depreciation is used for tangibles that were put into service and are on the record may in certain cases be extremely important to corporate taxpayers. With the economic and business environment on the flux, taxpayers are not always capable of predicting the tax effects of prior depreciation rate choices and their impact on the final tax performance of their companies in the long run.
If this issue pertains to your business and you are interested in our assistance, please contact us.
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