Polish Standard Declining with a Switch to Flat Rate

The Polish tax depreciation method used in the first fiscal year is the Standard Declining Polish tax depreciation method. The rate of depreciation is derived by multiplying the flat rate with the depreciation factor.

The formula used to calculate the rate of depreciation used by the Declining Standard Polish tax depreciation method is as follows:

Flat Rate * Depreciation Factor

For example if the flat rate is 20 percent and the depreciation factor is 3, then the depreciation rate is:

20% * 3 = 60%

After the first fiscal year, at the beginning of every fiscal year a test is performed to verify whether the estimated depreciation amount calculated based on the Standard Declining 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 Standard Declining Polish tax depreciation method is equal to or less than the estimated depreciation amount calculated based on the flat rate, then the depreciation method from that fiscal year onward changes to the Flat Rate method. Otherwise, depreciation should continue with the Standard Declining Polish tax depreciation method. The depreciation basis for the Standard Declining Polish tax depreciation method is always net book value.

Example - Polish Standard Declining with a Switch to Flat Rate

Month Year 1: 20% * 2 (4000.00) Year 2: 20% * 2 (2400.00) Year 3: 20% (2000.00) Year 4: 20% (1600.00)
M1 333.33 200.00 166.67 166.67
M2 333.33 200.00 166.67 166.67
M3 333.33 200.00 166.67 166.67
M4 333.33 200.00 166.67 166.67
M5 333.33 200.00 166.67 166.67
M6 333.33 200.00 166.67 166.67
M7 333.33 200.00 166.67 166.67
M8 333.33 200.00 166.67 166.67
M9 333.33 200.00 166.67 166.67
M10 333.33 200.00 166.67 99.97
M11 333.33 200.00 166.67 --
M12 333.37 200.00 166.63 --

In this example:

The depreciation reserve amounts at the end of each year are as follows: