VAT tax on real estate sales by private individuals

This article answers the following questions:

• Can a real estate sale transaction, in which a private individual uses the assistance of a proxy, be subject to VAT?
• What actions taken by a private individual may lead to the sale of real estate being taxed with VAT?
• How is the sale of real estate from the joint marital property taxed?

In the first half of 2025, two significant rulings were issued – one by the Supreme Administrative Court of Poland, and the other by the Court of Justice of the European Union (CJEU) – concerning the application of VAT to real estate sale transactions carried out by private individuals. Both decisions are highly relevant in assessing the criteria that determine who may be regarded as a VAT taxpayer (and whether the sale consequently triggers a VAT liability). Importantly, the CJEU also addressed how joint marital property should be treated in the context of such transactions.

The impact of a power of attorney for a sale of real estate on VAT taxpayer status

In the Polish tax system, private individuals who occasionally sell items from their personal assets (e.g. real estate) are, as a rule, not subject to VAT. However, the regulations do allow VAT to be imposed on such a transaction if the manner in which the sale is prepared or conducted resembles the practices typical of the professional market, carried out by entities engaged in business activity. Importantly, it does not matter whether the individual is formally registered as conducting a business or not.

The boundary between managing private assets and engaging in professional real estate sales is often blurred. One factor frequently considered by Polish tax authorities and administrative courts when assessing such activities is whether the seller has granted a power of attorney in connection with the sale of real estate.

Passive private seller and active purchaser acquiring real estate within the scope of business activity

In the judgment of the Voivodship Administrative Court dated 8 August 2021, case no. I SA/Sz 486/21, the court examined a situation in which a private individual sold a plot of land to a joint-stock company. Prior to the execution of the final sale agreement (under a preliminary agreement), the purchaser was granted a power of attorney by the seller, authorising the purchaser to act on the seller’s behalf before all public administrative authorities and to undertake all factual and legal actions necessary to obtain decisions and permits related to the investment planned by the purchaser, which was to be located on the plot in question.

Such a procedural model reflects standard market practice, whereby the purchaser makes the acquisition of the property conditional upon the seller obtaining the requisite official documents (for example, subdivision decisions, zoning decisions, building permits, etc.). This serves as confirmation and a safeguard for the purchaser that the intended investment plans will be feasible on the given property.

In such a case, it is the purchaser who – acting under the power of attorney granted by the seller – undertakes actions to verify the conditions for concluding the real estate sale agreement.

In an individual tax ruling issued by the Head of the National Revenue Administration Information Centre (NRAIC), it was determined that, in the above-described situation, the seller acted in the capacity of an entrepreneur. Consequently, the seller was deemed liable to pay the applicable VAT on the sale of the plot. The authority justified its position by stating that the manner in which the transaction was conducted indicated cooperation between both parties (the seller and the purchaser), which allowed the process of acquiring the property to be regarded as a form of joint undertaking. Furthermore, according to the Head of NRAIC, the purchaser’s actions – carried out on behalf of the seller under the granted power of attorney – enhanced the value of the plot and made the property more attractive on the market. In the view of the tax authority, such conduct goes beyond the ordinary management of private assets by the seller.

However, the Voivodship Administrative Court did not share this position. The court ruled in favour of the seller, who had entered into a dispute with the tax authorities, and held that the sale of the property by a private individual was not subject to VAT. In its reasoning, the court clearly emphasised that the seller’s activity did not exceed the bounds of ordinary, rational management of private assets and did not exhibit characteristics of professionally or commercially conducted activity. Crucially – as noted by the court – the actions undertaken by the purchaser under the power of attorney granted by the seller were carried out in the purchaser’s own interest, with the intention of optimally adapting the property to their own investment purposes.

The above judgment of the Voivodship Administrative Court was appealed by the tax authority to the Supreme Administrative Court, which, however, dismissed the complaint by judgment dated 23 April 2025, case no. I FSK 2150/21.

CJEU judgment – it is not the form, but the scale and nature of the activities that determine whether VAT is payable on the sale of real estate

In its judgment of 3 April 2025, case reference C-213/24, the CJEU also addressed a key practical issue: the boundary between private asset management and the sale subject to VAT.

The starting point in the EU judgment concerning a Polish case was a factual situation in which a married couple (private individuals) decided to sell their jointly owned properties. However, they commissioned a professional entrepreneur to carry out the preparatory activities for the sale. Acting as their proxy, this entrepreneur undertook a series of actions: subdividing the property, contacting the local authority to initiate changes to the spatial development plan, acquiring land for access roads to the property, equipping the site with infrastructure, conducting marketing activities to advertise the subject of the transaction, and preparing the sale agreements.

The CJEU held that although all activities were carried out by a professional proxy, this does not alter the tax assessment of the landowners themselves, whose income from the sale of the property should, in this case, be subject to VAT. The Court emphasised that even if a person entrusts sales-related actions to another entity, they may still be regarded as a VAT taxpayer if they engage – either directly or through a proxy – in active dealings in real estate.

The nature of the activities is crucial. A property owner crosses the boundary of ordinary private asset management if, through their proxy, they employ measures typical of professionals, such as:

• site infrastructure development,
• advertising and promotional activities,
• requests for planning amendments,
• investment-related actions. 

Such conduct is no longer VAT-neutral and – as the CJEU indicated – falls within the scope of activities carried out for the purpose of generating income, thereby justifying taxation.

Practical conclusions arising from judgments clarifying the taxation of real estate sales

The rulings of the Voivodship Administrative Court and the Court of Justice of the European Union carry significant implications for private individuals selling real estate. Most importantly, they indicate that Polish tax authorities cannot automatically and uncritically classify a seller as a VAT taxpayer. Even if a transaction appears professionally organised, the decisive factor remains a case-by-case analysis – particularly the purpose of the sale, the context of the transaction, and the seller’s level of involvement. It is the actual activity (or lack thereof) on the part of the seller that determines whether the sale of real estate is subject to VAT.

In practice, tax authorities often assume that if a seller grants someone power of attorney to sell a property, this constitutes a key indication that the seller is engaging in activities beyond ordinary private asset management. However, this is far from clear-cut. The purpose and scope of the power of attorney play a crucial role in assessing the seller’s status in the context of VAT taxation.

As indicated by the cited administrative court rulings, if the actions taken under a granted power of attorney are carried out in the interest of the buyer, the power of attorney should not be considered a basis for classifying the seller’s conduct as exceeding the scope of private asset management. However, the situation is different if the attorney-in-fact acts solely in the interest and on behalf of the seller.

How does marital joint property affect the taxation of real estate sales?

In the aforementioned CJEU ruling, the Court also addressed the issue of joint marital property in the context of VAT taxation on the private sale of jointly owned real estate.

The EU Court adopted the position that – under Polish legislation – when joint marital property exists between spouses (and they act jointly towards third parties, for example by jointly entering into contracts), it is possible to recognise the statutory co-ownership as a separate VAT taxpayer.

The current practice of tax authorities in Poland

Until now, due to the lack of explicit provisions in the VAT Act, Polish tax authorities and administrative courts have followed a practice whereby the sale of real estate from the joint marital property (provided it was not conducted as part of a business activity by either spouse) was treated as a sale carried out by two separate VAT taxpayers – namely, both spouses – assuming, of course, that the transaction was subject to VAT.

As a result, the transaction was settled on a fifty-fifty basis, assuming that each spouse was selling their equal share.

Implications of the CJEU ruling for spouses paying tax on the sale of real estate

The CJEU ruling, insofar as it addresses the recognition of joint marital property as a VAT taxpayer, can be considered revolutionary.

Therefore, given the absence of relevant provisions in Polish tax law, it should be expected that the approach adopted by the EU Court will significantly influence the actions of our legislature and will certainly have consequences for the current practices of Polish tax authorities and administrative courts.

Moreover, in practice, spouses now have a strong argument that transactions between them are VAT-neutral, provided they involve assets belonging to their joint marital property. It is therefore worth exploring the available options and strategies for minimising tax burdens. If you are seeking support with real estate tax settlements – or simply need tax advice – we invite you to get in touch.