How to account for photovoltaic leases? There is an interpretation
Photovoltaic leasing has become an important issue in the business of leasing companies for some time. This topic is constantly popular, and the changes in the energy market caused by the war in Ukraine may lead to an intensified interest in the installation of such equipment. In this connection, it is worth noting that one of the first – if not the first – interpretation on accounting for expenses of this type appeared in March 2022.
What was the interpretation about?
This is about individual tax ruling from 11 March 2022 (ref. 0111-KDIB1-1.4010.26.2022.1.SH). The applicant included two questions in one application. The first was whether a photovoltaic installation is a separate fixed asset, and the second was what is the appropriate depreciation rate for such a device. Importantly, the applicant indicated that it has an interpretation from the GUS indicating that the photovoltaic set – as a whole – is classified under KŚT (classification of fixed assets). code 669. Equipment classified under this code, in turn, should be depreciated at a rate of 10%.
Tax authority confirmed the applicant’s position in the interpretation, indicating that the photovoltaic set is a separate fixed asset, and the depreciation rate is, according to its position, 10%.
Interpretation – meaning in CIT and VAT.
Zestawy fotowoltaiczne są tylko jednym z wielu aktywów firm leasingowych, które podlegają montażowi w budynkach lub na nich, względnie na gruncie. Leasing tego typu aktywów wiąże się z pewnymi ryzykami podatkowymi, wynikającymi z ryzyka uznania, że urządzenia zamontowane na nieruchomości stają się jej częścią, co z kolei mogłoby przekreślać możliwość zawarcia umowy leasingu takich urządzeń. Uznanie, że fotowoltaika nie jest elementem budynku, ale odrębnym urządzeniem, jest kluczowe do bezpiecznego nabycia i oddania jej do użytkowania w ramach umowy leasingowej.
Unfortunately, confirming this possibility by way of interpretation is very difficult, primarily because the tax authorities refuse to classify fixed assets under the KŚT. Hence, the only way for a lessor to be relatively secure is to ask the CSO to confirm the classification, although even this office avoids answering the question of equipment related to real estate (we wrote about this in the text “The CSO’s little help with the Fixed Asset Classification”).
Recognizing that photovoltaics are not part of a building, but a separate piece of equipment, is key to safely acquiring and putting them to use under a lease agreement. And while the interpretation described above applied to CIT, it also has important implications for VAT. After all, since the photovoltaic set is a separate device, the risk of considering that because the financier has not acquired the goods and has entered into a de facto loan agreement is negligible.
In the present case, however, the applicant managed to obtain the opinion of the CSO in this regard. It is also important to note that the KŚT is simply outdated and does not list photovoltaic sets explicitly. And while it seems that photovoltaics should be classified in subgroup 34 – along with generator sets – photovoltaic panels are constructed based on a completely different technology, which cannot be classified under any of the generator sets. Hence, classification under code 669, or “other non-industrial equipment,” seems the only reasonable option. Nevertheless, a lessor that wants to include photovoltaics in its leases should certainly consider obtaining its own GUS classification.
Admittedly, the interpretation described related to CIT, but it is also relevant for VAT. This is because since the photovoltaic set is a separate device, the risk of considering that because the financier has not purchased the goods and has entered into a de facto loan agreement is negligible.
Further questions in the queue
However, the individual tax ruling does not resolve all the key issues regarding photovoltaic leasing. First of all, it should be borne in mind that a rooftop-mounted photovoltaic kit is significantly different from a photovoltaic power plant, the construction of which, however, may require certain building components. It is also important to note that the interpretation does not answer the question about the possibility of applying an increased amortization rate – up to the 20% level. The risk of property taxation of such equipment may also be a certain issue, although it seems least controversial.
Certainly, the leasing of photovoltaic sets is an interesting product for most financiers. This makes it all the more important to minimize the tax risks associated with such transactions.
Author: Bartosz Mazur, Tax Advisor