A machine, computer equipment or a car entered in the fixed asset register does not have to stay in the business forever. Anyone running a sole proprietorship may move such an asset into private ownership at any time — without closing the business and without any official approval. The operation looks like a formality: a handover protocol and removal from the register. The tax consequences, however, can be surprising, and some of them only surface on sale, several years later.
Withdrawal is not a sale — but it is not tax-neutral
In a sole proprietorship, business and private assets belong to the same person. Withdrawing a fixed asset is therefore not a disposal: the owner does not change, only the purpose of the item does. This applies to machinery and equipment as well as to cars and real estate. Depreciation ends at that moment — the final write-off is made in the month of withdrawal, and the asset disappears from the fixed asset register.
An unchanged owner does not, however, mean no consequences. The Polish VAT Act treats the free-of-charge transfer of goods belonging to the business to the taxpayer's private purposes as a supply of goods for consideration, provided that a right to deduct input tax arose on the acquisition, importation or production of those goods or their components. It is precisely this provision that drives most of the settlements described below.
VAT on the transfer to private use
The rule is simple: if a right to deduct VAT arose on purchase, in whole or in part, transferring the fixed asset into private ownership is subject to VAT at the applicable rate. The taxable base is not the price on the purchase invoice but the market value of the asset at the moment of withdrawal — for equipment several years old, usually far lower. It is worth documenting that value, for example with printouts of offers for comparable second-hand items.
If no right to deduct arose, no VAT is charged on withdrawal. That is the case for purchases from a VAT-exempt trader, for a car bought under a sale contract from a private individual, or for assets contributed to the business from private property. Real estate is a separate situation: the transfer of a building or premises may be VAT-exempt, among other cases when more than two years have passed since first occupation. The exemption does not close the matter, though, because it triggers the adjustment mechanism.
Adjusting the input tax deducted, and the periods to watch
The second mechanism is the adjustment of input tax deducted on purchase. It applies where withdrawal occurs before the end of the so-called adjustment period, counted from the year the fixed asset was placed in service. That period is ten years for real estate and perpetual usufruct rights to land, five years for other fixed assets with an initial value above PLN 15,000, and one year where the initial value does not exceed PLN 15,000. Commercial premises with deducted VAT, transferred into private ownership in the sixth year of use, therefore mean repaying the portion of the deduction attributable to the remaining years of the ten-year period. The adjustment is reported in the return for the first period of the year following the year of withdrawal.
Cars have their own deadlines: 60 months where the initial value exceeds PLN 15,000 and twelve months below that amount, counted from the month of acquisition or entry into service. For a car used for mixed purposes, where 50 percent of the VAT was deducted, the adjustment works in the entrepreneur's favour: withdrawal within the adjustment period allows the input tax to be increased by the part not previously deducted, in proportion to the number of months remaining until the end of the 60-month period. That amount reduces the output VAT due on the car's market value. Because the rules depend on the type of asset and how it was used, the calculation is best done before the decision is made.
Income tax: withdrawal is tax-free, a sale within six years is not
The transfer of a fixed asset into private ownership does not in itself create income for personal income tax purposes. There is no disposal of an asset, so there is nothing to tax. The undepreciated part of the initial value does not become a deductible cost at that point — it stays suspended until a possible sale.
Income arises only on a disposal for consideration, and only where it occurs before six years have passed, counted from the first day of the month following the month of withdrawal. So if a machine is withdrawn in September 2026, the period starts on 1 October 2026, and a sale up to 30 September 2032 must be accounted for as business income. After that date, the sale of a movable item falls outside income tax. This is the most common source of trouble: the entrepreneur sells the withdrawn car a year after removing it from the register and treats the transaction as private, although it belongs in business income.
On a sale within that period, the undepreciated part of the initial value is the deductible cost. If a machine had an initial value of PLN 30,000, write-offs of PLN 12,000 were made, and the sale price is PLN 21,000, the cost is PLN 18,000 and taxable income is PLN 3,000. That income enters the tax base under the chosen form of taxation — the tax scale or flat-rate tax — and also affects the health contribution base.
Lump-sum tax on registered income: 3 or 10 percent
Entrepreneurs taxed under the lump-sum tax on registered income (ryczałt) have no deductible costs, so the entire sale proceeds are taxed. Disposal of movable assets used in the business is taxed at 3 percent — including where they were withdrawn from the business before sale, provided that fewer than six years have passed between the first day of the month following the month of withdrawal and the date of disposal. For real estate used in the business, the rate is 10 percent.
Documents and the most common mistakes
The withdrawal must be documented. You need: removal of the asset from the fixed asset register, a protocol transferring it to private use and — where a VAT liability arises — an internal document serving as the basis for reporting the tax in the sales register. The protocol should state the date of transfer, the entrepreneur's details including the tax identification number (NIP), a description of the asset together with its number in the register, information on VAT treatment and the rate applied, and a signature. No invoice is issued — the transfer is made to oneself. These documents become part of the company's accounting records.
Four mistakes recur most often: withdrawing a car without accounting for VAT despite an earlier deduction, overlooking the multi-year adjustment on real estate, the absence of a handover protocol, which makes it hard to establish the date of withdrawal later, and treating a sale within the six-year window as a private transaction. Each usually comes to light during an inspection or at the annual settlement, when the correction already costs interest.