Soubory movitych veci

Set of movable assets

According to the Income Tax Act, a set of movable assets with a separate technical and economic purpose is considered to be separate tangible property if its entry price exceeds CZK 80,000 and its useful life exceeds 1 year.

A set of movable assets, as defined by the Income Tax Act, is a component part of a production or other unit. The entry price of a set is determined as the sum of the entry prices of all items that are part of the set. The set may include assets which, individually, do not exceed the entry price of CZK 80,000, but collectively with other assets in the set, exceed that amount.

In the case of using a set, the Income Tax Act imposes additional obligations on the taxpayer, in particular the obligation to keep conclusive records of the individual items included in the set and of any changes to the set (additions, disposals). From an administrative point of view, the use of a set is therefore not preferable to a situation where the taxpayer would keep records of individual assets separately.

However, there may be situations where it may be more advantageous or practical to use a set of assets. One such situation is the use of a set when a main functional item is classified in a lower depreciation group than other items. Since the depreciation group for the entire set is determined by the main functional item, in such a situation all the assets included in the set will be depreciated in the same group as the main functional item, although their depreciation group would be different if they were separately classified.

A second advantage may be the procedure for replacing part of a set. If the taxpayer records the tangible assets separately, then the exchange of one asset for another would be treated as a disposal of the original asset and the acquisition of the new asset. For a set of assets, this will work like a repair by exchange (provided that the movable item is replaced by an item with the same characteristics).

A third potential advantage is related to the possibility of making provisions for repairs to tangible assets. A provision for repairs can only be made in respect of tangible assets, and not in respect of assets whose entry price does not exceed CZK 80,000. However, if it were possible to create a set from such assets, then it would also be possible to create a provision for repairs in respect of such a set. However, as it follows from the case law 9 Afs 307/2017-24, it is necessary for the existence of a set to comply with all the conditions set out for a set in the Income Tax Act (in particular, classification in one depreciation group).

Finally, we would like to point out that it is not entirely clear from the legislation in which cases a set of assets can be created. We therefore recommend that you approach the process of creating sets with caution and carefully consider whether your particular situation meets all the relevant requirements set out in the Income Tax Act (in particular whether it is a component part of a production or other unit).

For further questions, please contact the authors of this article or other EY team members with whom you are in contact.

Authors:

Ladislava Zamazalová

Veronika Šotolová