Depreciation is one of those tax concepts that may sound technical, yet in practice it has very tangible implications for businesses. In simple terms, it allows taxpayers to recognise the cost of acquiring a fixed asset—such as real estate or intangible assets—gradually, through depreciation charges, rather than as a one-off expense.
Until recently, the rules in this area were relatively straightforward and stable. As a general principle, under the Act of 15 February 1992 on Corporate Income Tax (the “CIT Act”) and the Act of 26 July 1991 on Personal Income Tax, taxpayers were entitled to depreciate real estate—both residential and commercial—and treat depreciation charges as tax-deductible costs. This level of predictability was crucial from the perspective of investment planning and tax settlements.
The situation changed significantly with the entry into force of the Act of 29 October 2021 amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other acts (the so-called “Polish Deal”). On the one hand, the legislator excluded the possibility of tax depreciation of residential buildings and premises; on the other hand, it introduced specific limitations applicable to real estate companies.
In the case of the latter, particular importance was attached to linking tax depreciation charges with those recognised under accounting regulations. Following the amendments introduced by the Polish Deal, Article 15(6) of the CIT Act provides that, in the case of real estate companies, depreciation charges relating to fixed assets classified in Group 1 of the Fixed Assets Classification may not exceed, in a given tax year, the depreciation or amortisation charges recognised under accounting rules and charged to the entity’s profit or loss account. In other words, real estate companies were effectively deprived of the ability to recognise tax depreciation exceeding the amounts recognised for accounting purposes.
This restriction on depreciation in real estate companies quickly gave rise to interpretative doubts, particularly in relation to commercial properties recognised for accounting purposes as investment properties within the meaning of Article 3(1)(17) of the Accounting Act of 29 September 1994 and measured at fair value. Under this model, such assets are not treated as depreciable fixed assets for accounting purposes; instead, changes in their value are recognised directly in profit or loss. In practice, this results in the absence of accounting depreciation.
This raised the question of whether, in a situation where a taxpayer does not recognise depreciation charges for accounting purposes, the limitation under Article 15(6) of the CIT Act applies at all and, consequently, whether tax depreciation may still be recognised.
This discrepancy was particularly evident in relation to investment properties. Many real estate companies—both operating within international groups and domestically—apply the fair value model, under which properties are not subject to accounting depreciation and their value is regularly updated to reflect market levels, with changes recognised in profit or loss. As a result, accounting does not reflect the consumption of the asset through depreciation but rather its current market value, thereby deepening the divergence between accounting and tax treatment.
The tax authorities adopted the position that Article 15(6) of the CIT Act should be interpreted such that tax depreciation charges may not exceed those recognised under accounting rules. Consequently, it was assumed that if a company—due to classifying a property as an investment property—does not recognise any depreciation charges for accounting purposes (i.e. the amount is “zero”), it is likewise not entitled to recognise depreciation for tax purposes (e.g. individual ruling of the Director of the National Revenue Information of 3 June 2022, ref. 0111-KDIB1-1.4010.146.2022.1.AN).
A different approach has been adopted by the administrative courts. In their case law, they have accepted an interpretation under which the absence of accounting depreciation—resulting from the classification of assets as investment properties—does not preclude the recognition of depreciation for tax purposes. This approach has been reflected, inter alia, in the judgments of the Supreme Administrative Court (the “NSA”) of 5 March 2025 (ref. II FSK 896/23), 5 March 2025 (ref. II FSK 897/23), and 3 April 2025 (ref. II FSK 897/23), as well as in judgments of the voivodship administrative courts, which held that in such circumstances the limitation under Article 15(6) of the CIT Act does not apply.
It is precisely this divergence between the approach of the tax authorities and that of the courts that has become one of the drivers for further legislative amendments.
Against this background, particular attention should be paid to the latest version of the legislative proposal designated as UD116 (the “UD116 Draft”). Its primary objective is to eliminate the above inconsistency between accounting and tax treatment by linking tax depreciation more closely to accounting rules. The explanatory memorandum explicitly highlights the need to eliminate situations in which a taxpayer recognises tax-deductible costs that are not reflected in the entity’s financial result.
The UD116 Draft provides that the ability to treat depreciation charges as tax-deductible costs will be conditional upon their recognition in the accounting records. In practice, this means that if a property—due to its classification as an investment property—is not subject to accounting depreciation, the taxpayer will also lose the ability to recognise depreciation for tax purposes. In this way, the legislator aims to eliminate the existing asymmetry between accounting and taxation.
For real estate companies, the implications of these changes may be significant. Entities applying the fair value model, i.e. those that do not recognise depreciation charges for accounting purposes, will lose the ability to recognise such charges as tax-deductible costs on a current basis. This does not, however, mean that the cost is permanently disallowed, but rather that the timing of its recognition is shifted—generally to the moment of disposal of the property. As a result, this leads to an increase in the tax base during the holding period and, consequently, higher ongoing tax burdens.
Moreover, this change may prompt some entities to reassess their adopted valuation models, although in practice many taxpayers have already undertaken such analyses when the earlier Polish Deal regulations were introduced.
Marta Zaręba
Senior Consultant
