In practice, it happens that taxpayers buy machines and software. The question then arises as to how to classify the purchase of such software for CIT purposes.
Pursuant to Article 16b(1)(4) and (5) of the Polish CIT Act, subject to Article 16c, copyright or related economic rights acquired from another entity that are suitable for commercial use on the date of acceptance for use, as well as licenses with an expected period of use longer than one year, used by the taxpayer for the purposes related to its business activity or made available by the taxpayer for use under a license agreement (sublicense), a lease agreement or an agreement specified in Article 17a(1), referred to as intangible assets.
Therefore, licenses and computer programs are subject to depreciation as intangible assets if they meet all of the following conditions:
- have been acquired by the taxpayer,
- are suitable for commercial use on the day of acceptance for use,
- the expected period of their use is longer than one year,
- are used by the taxpayer for the purposes related to its business activity or put into use by the taxpayer on the basis of a licence (sub-licence) ballot box, lease or tenancy agreement or an agreement specified in Article 17a(1) of the Polish CIT Act.
Going further, it should be pointed out that pursuant to Article 1(2)(1) of the Copyright and Related Rights Act, a computer program is a work subject to copyright.
In practice, there are two types of software, the first system software being an integral part of the computer hardware, the second application software being independent in nature.
In our opinion, system software, i.e. software that is an integral part of computer hardware, and thus cannot constitute a separate intangible asset. In addition, in our opinion, system software increases the initial value of the fixed asset to which it is associated, i.e. a computer or a machine.
On the other hand, in our opinion, application software constitutes a tangible and legal asset in accordance with Article 16b(1)(4) and (5) of the CIT Act, because it is independent in nature, and moreover, the machine software is a computer program within the meaning of the Act on Copyright and Related Rights.
The above interpretation is confirmed by the individual interpretation of the Director of National Tax Information of 21 March 2022, file reference number 0111-KDIB1-3.4010.660.2021.2.IZ.
At the same time, we would like to add that pursuant to Article 16f(3) of the CIT Act, depreciation write-offs are made in accordance with Articles 16h-16m when the initial value of a fixed asset or intangible asset on the date of acceptance for use is higher than PLN 10,000. If the initial value is equal to or lower than PLN 10,000, taxpayers, subject to Article 16d(1), may make depreciation write-offs in accordance with Articles 16h-16m either once in the month of putting the fixed asset or intangible asset into use, or in the following month.
