When determining the tax consequences of acquiring fixed assets, civil-law regulations may sometimes conflict with tax rules. This is particularly relevant where the parties agree to retain title to an asset until the full purchase price has been paid.
In its judgment of 25 June 2026, case no. II FSK 232/26, the Supreme Administrative Court (NSA) addressed the tax consequences of such an arrangement and considered whether a taxpayer may depreciate a fixed asset it uses even though it has not yet formally acquired ownership.
The case concerned a company planning to acquire a specialised metal-processing machine. The transaction was structured so that the machine would be delivered and installed at the company’s premises, while the purchase price would be paid in at least 18 monthly instalments. Once installed, the machine would be complete, operational and ready for use by the company and would be used for its business activities.
At the same time, the parties agreed that ownership of the machine would remain with the seller until the final instalment had been paid. Although the company would receive an invoice covering the full purchase price, including the advance payment already made, and would begin using the machine immediately after installation, ownership of the fixed asset would only transfer to the company at a later date.
The company therefore asked whether it would be entitled to make depreciation deductions from the moment the machine was put into use. Alternatively, if depreciation was not possible, it asked whether the purchase price could be treated as a tax-deductible cost.
The company argued that the right to make depreciation deductions should not depend solely on the formal transfer of ownership. In its view, the decisive factor should be the economic control exercised over the fixed asset. The company emphasised that the machine was complete, operational, available for use and actually used in its business activities. It also bore the costs associated with its acquisition. Accordingly, the company believed that depreciation should be possible before formal ownership was transferred.
Alternatively, the company argued that the expenses incurred should be deductible for tax purposes. Otherwise, the deduction of the expenditure would effectively be postponed until all instalments had been paid, despite the fact that the machine was already being used to generate business income.
Both the Director of the National Tax Information (KIS), in an individual tax ruling of 22 May 2025, ref. no. 0114-KDIP2-1.4010.192.2025.1.KW, and the Provincial Administrative Court in Warsaw, in its judgment of 12 November 2025, case no. III SA/Wa 1514/25, disagreed with the company.
The authorities pointed out that one of the key conditions for recognising an asset as a fixed asset for tax purposes is that it must be owned or jointly owned by the taxpayer. Without this condition, depreciation deductions cannot be made. Since, under the agreement, ownership remained with the seller until all instalments had been paid, the company could not depreciate the machine before acquiring ownership.
The authorities also rejected the company’s alternative position concerning the immediate deduction of the purchase expenditure. Such an approach could result in the same expenditure being recognised twice for tax purposes: first when the expenditure was incurred and subsequently through depreciation deductions once the machine became the company’s property.
The Supreme Administrative Court, in its judgment of 25 June 2026, case no. II FSK 232/26, dismissed the company’s cassation appeal and upheld the position of the tax authority and the court of first instance. The NSA emphasised that Article 16a(1) of the Polish Corporate Income Tax Act expressly requires, among other conditions, that the fixed asset be owned or jointly owned by the taxpayer in order for depreciation deductions to be made.
According to the NSA, the conditions set out in this provision must be met cumulatively. Therefore, the fact that the machine was complete, operational and used in the company’s business was not sufficient. Since the company itself acknowledged that ownership would only be transferred after payment of the final instalment, it would only acquire the right to depreciate the machine from that point onwards.
The NSA also rejected the company’s position regarding the possibility of treating the purchase expenditure as a tax-deductible cost before ownership was acquired. The instalments forming part of the purchase price constitute an element of the acquisition cost of the fixed asset. They may therefore be recognised for tax purposes through depreciation once the company becomes the owner of the machine.
The temporary inability to make depreciation deductions does not change the nature of the expenditure. Allowing the company to deduct the instalments before acquiring ownership could lead to the purchase price being recognised as a tax cost twice: first through direct deductions and then through depreciation after ownership is transferred.
The NSA also stressed that the parties are free to structure their civil-law agreements under the principle of freedom of contract. However, contractual arrangements do not determine the tax consequences of a transaction. Those consequences are governed by the applicable tax legislation. In the Court’s view, the company effectively sought to adapt the interpretation of the tax provisions to the contractual structure it had chosen and to the tax result it expected.
The judgment shows that when drafting agreements concerning the acquisition of fixed assets, particular attention should be paid to provisions governing the transfer of ownership. Such provisions may affect not only the parties’ contractual rights and obligations but also the timing of tax recognition of the related expenditure.
In practice, the judgment confirms that the use of a machine and economic control over it are not sufficient to start tax depreciation if ownership remains with the seller. Where title is retained until the final instalment is paid, the taxpayer must wait until ownership is acquired before recognising the machine as its depreciable fixed asset.