In the first fiscal year this depreciable basis rule uses the 30% Flat Rate Polish tax depreciation method. The asset is depreciated at a fixed depreciation rate of 30 percent in the period of addition. After that, the depreciation is suspended for the remainder of the periods in the fiscal year. There should be no catchup depreciation even if an adjustment is made in subsequent periods in the first fiscal year after the 30 percent depreciation has been charged.
In the second fiscal year, the depreciation rate is calculated using the Declining Classic Polish tax depreciation method. The formula to be used by the Declining Classic Polish tax depreciation method is calculated by multiplying the flat rate with the depreciation factor defined in the Bonus Depreciation Rules window.
The formula used to calculate the rate of depreciation used by the Declining Classic Polish tax depreciation method is as follows:
Flat Rate * Depreciation Factor
For example, if the flat rate = 20 percent and the depreciation factor is 2, then the resulting depreciation rate for this Polish tax depreciation method is:
20% * 2 = 40%
Depreciation in the second fiscal year is always calculated on the basis of cost. Depreciation in the subsequent fiscal years (where the Declining Classic depreciation Polish tax depreciation method is used) is calculated on the following basis:
Cost - Depreciation Reserve + First Year Reserve
After the end of the second fiscal year, at the beginning of every fiscal year, a test is performed to verify whether the estimated depreciation amount calculated based on the Declining Classic Polish tax depreciation method is equal to or less than the estimated depreciation amount calculated based on the flat rate.
If the estimated depreciation calculation based on the Declining Classic Polish tax depreciation method is equal to or less than the estimated depreciation amount calculated based on the flat rate (the depreciation basis for the Flat Rate method is always cost), then the depreciation method from that fiscal year onward needs to switch to the Flat Rate method. Otherwise, depreciation will continue with the Declining Classic Polish tax depreciation method.
| Month | Year 1: 30% (3000.00) | Year 2: 20% * 2 (4000.00) | Year 3: 20% * 2 (2400.00) | Year 4: 20% (600.00) |
|---|---|---|---|---|
| M1 | 3000.00 | 333.33 | 200.00 | 166.67 |
| M2 | 0.00 | 333.33 | 200.00 | 166.67 |
| M3 | 0.00 | 333.33 | 200.00 | 166.67 |
| M4 | 0.00 | 333.33 | 200.00 | 99.99 |
| M5 | 0.00 | 333.33 | 200.00 | -- |
| M6 | 0.00 | 333.33 | 200.00 | -- |
| M7 | 0.00 | 333.33 | 200.00 | -- |
| M8 | 0.00 | 333.33 | 200.00 | -- |
| M9 | 0.00 | 333.33 | 200.00 | -- |
| M10 | 0.00 | 333.33 | 200.00 | -- |
| M11 | 0.00 | 333.33 | 200.00 | -- |
| M12 | 0.00 | 333.37 | 200.00 | -- |
In this example:
The asset cost is $10,000.
Year 1 uses the 30% Flat Rate Polish tax depreciation method with a depreciation basis of 10,000.
Year 2 uses the Declining Classic Polish tax depreciation method with a depreciation basis of 10,000.
Year 3 uses the Declining Classic Polish tax depreciation method with a depreciation basis of 6000.
Note: In this case, the basis has changed to Cost - Reserve + First year reserve.
Year 4 uses the Flat Rate method with a depreciation basis of 10,000.
The depreciation reserve amounts at the end of each year are as follows:
Year 1: 3000.00
Year 2: 7000.00
Year 3: 9400.00
Year 4: 10,000.00