In recently issued rulings, the Supreme Administrative Court (NSA) has confirmed the possibility of recognizing depreciation charges for Corporate Income Tax (CIT) purposes in relation to real estate. This significant information is a positive sign in the fight to include real estate depreciation as tax-deductible costs for taxpayers with real estate company status.
Background of the dispute
Beginning in 2022, the so-called "Polish Deal" introduced legal provisions that restricted the ability of real estate companies to recognize depreciation of fixed assets classified under group 1 of the Fixed Asset Classification (KŚT) for tax purposes. The tax authorities have taken the position that real estate companies are not entitled to treat depreciation of real estate as tax-deductible costs under the amended Article 15(6) of the CIT Act.
The official stance of the tax authorities is as follows: in the case of assets valued at so-called fair value, the accounting depreciation value is “0.” Consequently, real estate companies are not entitled to recognize depreciation for tax purposes because they do not perform accounting depreciation, and thus, the accounting depreciation value is “0.”
An example is the tax ruling dated 16 June 2023, ref. 0114-KDIP2-1.4010.233.2023.1.MW:
“The company, being a real estate company as referred to in Article 4a(35) of the CIT Act, is subject to the legal norm discussed in Article 15(6) of the CIT Act, which links the limitation on tax-deductible depreciation to the depreciation value determined under accounting regulations. Since the depreciation (write-down) value in the case in question is '0'—because the company does not depreciate the asset under accounting rules—then, in view of the wording of the legal norm, the company is not entitled to recognize depreciation on a fixed asset from group 1 of the classification as a tax-deductible cost under the amended Article 15(6) of the CIT Act.”
The Head of the National Tax Information (KIS) has not always upheld this position, as evidenced in other rulings: ref. 0111-KDIB1-2.4010.322.2022.2.ANK and ref. 0114-KDIP2-1.4010.407.2024.1.DK.
Diverging view of the Provincial Administrative Courts (WSA)
The courts, in most cases, have disagreed with the tax authorities’ stance, accepting the taxpayers’ more favorable interpretation as correct. In 2023, several rulings were issued by Provincial Administrative Courts (WSA)—for instance, WSA in Poznań on 01.02.2023 (ref. I SA/Po 752/22), 10.02.2023 (ref. I SA/Po 789/22), and WSA in Warsaw (ref. III SA/Wa 1788/22, III SA/Wa 2755/22, III SA/Wa 2756/22)—in which the courts sided with the taxpayers, ruling that Article 15(6) of the CIT Act does not apply to real estate valued at fair value. As a result, real estate companies are entitled to fully recognize depreciation as a tax-deductible cost.
Recent jurisprudence – NSA ruling
The Supreme Administrative Court (NSA) disagreed with the tax authorities’ opinion in several consolidated cases (ref. II FSK 788/23, II FSK 789/23, II FSK 987/23, II FSK 1086/23, and II FSK 1652/23), ruling that a real estate company is indeed entitled to tax depreciation.
However, the NSA did not claim that the right to depreciation is unlimited. It clarified that for a real estate company to recognize depreciation after January 1, 2022, it must compare the amount of depreciation determined under applicable accounting standards (e.g., fair value) with a hypothetical value calculated according to the accounting regulations. If the depreciation determined under alternative accounting standards is higher, it must be reduced to the hypothetical value.
The court found the tax authority’s argument—that real estate companies cannot depreciate assets unless done under the Accounting Act—to be unfounded. It emphasized that the legislature did not intend to completely eliminate the ability to deduct depreciation as a cost for real estate companies. Had that been the intent, a corresponding prohibition would have been included in Article 16(1) of the CIT Act, rather than Article 15(6).
What’s next? – commentary from a KR Group Expert
The NSA rulings are groundbreaking, and we expect more favorable judgments confirming the possibility of recognizing depreciation for tax purposes. However, we caution that only those taxpayers who were parties to the NSA-decided cases can celebrate for now. Others must be prepared for the tax authorities to maintain their unfavorable position for a long time, despite these rulings—something that has occurred many times in recent years (e.g., in the matter of debt financing costs).
Individual tax rulings dated March 17, 2025 (ref. 0114-KDIP2-1.4010.58.2025.2.KW) and March 14, 2025 (ref. 0114-KDIP2-1.4010.62.2025.2.PK) show that even following a favorable second-instance ruling, the administrative line of the tax authorities may not quickly change in line with taxpayer-friendly interpretations.
At this stage, in order to claim depreciation in line with taxpayer expectations, a taxpayer must be ready for a dispute with the tax authorities—whether through obtaining an individual interpretation (likely preceded by court proceedings) or another form of legal protection (e.g., a ruling on overpayment). Taxpayers who do not wish to risk a dispute with the tax office should continue to apply the depreciation restriction (ban).
Łukasz Kempa, Head of Tax, KR Group
