Linkedin
Facebook
Email
more
Rental income and capital gains of Polish real estate
| Taxpayer | Basis of tax | Tax levied | Tax rates (2024) |
|---|---|---|---|
| Resident individual | Rental revenue (income) | Tax on recorded revenue/(Personal income tax) | 8.5 /12.5% (12/32%) |
| Capital gains | Personal income tax | 19% | |
| Non-resident individual | Rental revenue (income) | Tax on recorded revenue/(Personal income tax) | 8.5/12.5% (12/32%) |
| Capital gains | Personal income tax | 19% | |
| Resident company | Rental income | Corporate income tax | 9/19% |
| Capital gains | Corporate income tax | 19% | |
| Non-Resident company | Rental income | Corporate income tax | 9/19% |
| Capital gains | Corporate income tax | 19% |
Rental income
Individuals
Rental income is taxed as ordinary private or business income.
Liability to tax
Rental income derived by individuals may be subject to taxation in different forms:
- a tax on recorded revenue - in case of private lease,
- a tax on recorded revenue, a flat tax and a personal income tax according to general rules -in case of performing business activity.
Basis to tax
Taxation of rental income by individuals is conditioned by reached revenue threshold. If the annual revenue on rental does not exceed PLN 100 000, then 8.5% tax rate applies. The surplus over PLN 100 000 is taxed at a rate of 12.5%. In this case, the tax base consists of income without deducting any costs. This rules applies to both private and business rental income.
However, in case of business income, if taxation on general principles is chosen a flat tax rate of 19% or progressive tax rates of 12% or 32% are applied. In such cases the taxable base is income constituted by revenues minus the tax-deductible costs. Individuals are not able to depreciate residential buildings and residential premises.
Companies
Rental income is taxed as ordinary business income.
Liability to tax
Rental income earned by companies is subject to corporate income tax and taxed as ordinary business income.
Basis to tax
If the value of sales revenue (along with amount of the due VAT) does not exceed an equivalent in PLN of EUR 2 000 000 both in the previous and current tax year or when the taxpayer starts his business activity (in the year of beginning), a company is subject to corporate income tax at a flat rate of 9%.
Other companies are subject to corporate income tax at a flat rate of 19%. The tax base in both cases is income equal to revenue less the tax-deductible costs. Companies are not able to depreciate residential buildings and residential premises.
Capital gains
Individuals
Capital gains resulting from the sale of real estate are taxed within the scope of personal income tax. Capital gains arising from the sale of real estate within five years of purchase are taxed at a flat tax rate of 19%. The sale of real estate after the end of 5 years holding period is exempted from taxation.
Liability to tax
Capital gains are subject to personal income tax. Capital gains derived from the sale of real estate are exempt from tax if an individual - upon its sale, has been in possession of the real estate for at least five years counting from the end of the year in which it was purchased.
Basis of tax
A flat-rate income tax applies to capital gains at a rate of 19%. The revenue derived from the sale of a real estate doesn't fall within aggregation with revenues reached from the other sources. Sales revenue is decreased by tax-deductible costs represented by the purchase price and transaction costs, as well as expenses for renovation etc.
Companies
Revenues derived from sale of real estate are not considered as capital gains (which is a separate source of revenues) and are taxed as usual business income.
Liability to tax
Sale of a real estate is subject to corporate income tax. Such income is taxed at a rate of 19% or a decreased rate of 9%.
Basis of tax
Revenue derived from the sale of real estate is decreased by tax-deductible costs incurred in order to achieve revenues or to maintain or secure a source of revenues. These are the underappreciated parts of a real estate, transaction costs and expenses for renovation and improvement.
Real property company
A real property company is defined as an entity other than a natural person, obliged under the accounting regulations to prepare a balance sheet, in which:
- in the case of entities starting their activity:
- on the first day of the tax year at least 50% of the market value of its assets is the market value of real estate located in Poland or rights to such real estate, and;
- the market value of such real estate exceeds PLN 10 000 000 (ca. EUR 2,3m).
- in the case of other entities:
- as at last day of the year preceding the tax year, at least 50% of the book value of assets is the book value of real estate located in Poland or rights to such real estate, and;
- the balance value of such real estate exceeds PLN 10 000 000 (ca. EUR 2,3m), and;
- in case of the real property company not being a taxpayer of income tax, in the previous tax year the company obtained at least 60% of tax revenues from (sub)lease, of real estate and agreements of similar nature or from ownership rights relating to real estate/other real property companies.
Real property companies:
- have additional reporting obligations,
- fall within the scope of application of real estate clause,
- are obliged to tax on the profit obtained by the shareholders from the sales of shares.
Liability to tax
Sale of shares (or rights and obligations of similar nature) in real property company is subject to corporate income tax. Such income is taxed at a rate of 19%.
Basis of tax
Revenue derived from sale of real estate is value expressed in the price specified in the sales contract. If the price without a justified reason significantly deviates from the market value of these items or rights, the revenue shall be determined by the tax authority in the amount of market value. If a real property company does not have information about the value of the transaction, the fair market value of shares in the company subject to transaction should be taken as the basis of tax.
Place of effective management
Polish CIT regulations contain the definition of " place of effective management". A company registered outside Poland may be considered a Polish tax resident when:
persons or entities sitting in control bodies, constituting or managing the taxpayer,
they actually handle the current affairs of this taxpayer.In order to determine whether a taxpayer has a management board in Poland, it should be examined whether its current affairs are conducted on the basis of, in particular:
- a contract, decision, court ruling or other document regulating the establishment or functioning of that taxpayer, or
- powers of attorney granted, or
- connections within the meaning of transfer pricing regulations).
If a foreign company actually has a place of effective management in Poland, it is subject to taxation on its entire income in Poland. This means that the company is obliged to pay income tax, submit an annual declaration and make advance payments for income tax in Poland.
Polish VAT & transfer taxes
| Taxpayer | Basis of tax | Tax levied | Tax rates (2024) |
|---|---|---|---|
| Resident individual | Rental income | Value Added Tax | 23%/8%* |
| Transfer of real estate | Transfer Taxes | 2% | |
| Non-resident individual | Rental revenue (income) | Value Added Tax | 23%/8%* |
| Transfer of real estate | Transfer Taxes | 2% | |
| Resident company | Rental income | Value Added Tax | 23%/8%* |
| Transfer of real estate | Transfer Taxes | 2% | |
| Non-Resident company | Rental income | Value Added Tax | 23%/8%* |
| Transfer of real estate | Transfer Taxes | 2% |
*Sale of a real estate is subject to the VAT against a rate of 23% as a rule. Residential estates up to 150 m2 (flats) and 300 m2 (buildings) are taxed at the rate of 8%. Rental income is taxed at a rate of 23%.
Value Added Tax
Individuals
Value added tax (VAT) is a tax based on the increase in value of a product or service at each stage of the supply chain.
Liability to tax
Individuals performing business activities in Poland are in principle subject to the VAT.
Basis of tax
As provided for by the VAT Act sale and lease of a real estate is in general subject to the VAT, unless certain circumstances that entitle the seller to apply the tax exemption are met. The sale of private property is not subject to VAT.
Exempt from the VAT is a sale, which is not affected as part of the first settlement, or if between the first settlement and the delivery of a building elapsed at least two years. If certain conditions are met, the exemption might be opted out. The seller and purchaser may relinquish the above-mentioned tax exemption on some conditions specified in the VAT Act.
If the above-mentioned exemption cannot be applied, a tax exemption may be applied if the seller did not have the right to deduct VAT when acquiring a real estate, and has not made any expenses for its improvement - exceeding 30% of real estate's value, from which they would have deducted VAT.
Sale of a real estate is subject to the VAT against a rate of 23%. However residential estates up to 150 m2 (flats) and 300 m2 (buildings) are taxed at a rate of 8%. Rental income is taxed at a rate of 23%.
Interaction with transfer tax
As a rule, if the delivery of real estate is exempt from the VAT, then the obligation arises to pay transfer tax (in Poland: podatek od czynności cywilnoprawnych - PCC). This rule does not apply if the subject of sales agreement is a residential premises constituting a separate property, taxed at a 6% tax rate (please see details in “Transfer taxes”).
The purchaser of a real estate is committed to pay the tax which amounts to 2% of real estate's market value, except for special situations in which the tax is 6% (please see details in “Transfer taxes”).
Companies
The same rules apply as for individuals.
Transfer taxes
Individuals
Transfer tax is a tax on the passing of real estate from one person or company to another where the supply of real estate is exempt from the VAT. Transfer tax is also applicable when the supply of real estate will be classified as the supply of an enterprise or as an organised part of the enterprise.
Liability to tax
Transfer tax applies by the sale of real estate or proprietary law and their trade. Transfer tax is paid by the purchaser within 14 days from signing the sale agreement.
Basis of tax
Market value of real estate is subject to tax. The tax rate amounts to:
- 2% in the case of a sales agreement involving: real property, movable property, or perpetual usufruct right, a cooperative title to residential premises, cooperative title to business premises, and the following titles regulated by the provisions of cooperative law: title to a single-family house or title to premises in a small house;
1% in the case of agreement involving other rights.
The real estate purchase transaction is subject to a 6% tax rate in the following cases:
- the buyer purchases at least six residential premises constituting separate real estate in one or more buildings built on one piece of land, subject to value added tax, or shares in these premises, or has already purchased at least five such premises or shares in them, and
- the sales agreement is concluded with the same buyer for the sixth and each subsequent premises in this building or buildings or shares in them.
Exemptions
The transaction is exempt from transfer tax if the transaction is subject to the VAT. This exemption does not apply to sales agreements the subject of which is taxed at a 6% tax rate. Consequently, in such cases, the sale of the premises subjected to VAT, the buyer will pay both VAT and transfer tax.
Companies
The same rules apply as for individuals.
Polish local taxes
| Subject to tax | Basis of tax | Tax rates (2024) |
|---|---|---|
| Grounds | Usable area | 1.34 PLN/1 m2* |
| Real estates | Usable area | 33,10 PLN/1 m2* |
| Structures | Initial Value | 2% |
*concerns maximum tax rates when it comes to grounds / real estates used within business activity; each municipality can lower them
Individuals
Applicable tax rates are determined in form of resolution individually by every authorised municipality.
Liability to tax
The real estate tax is paid in four instalments (exception: one instalment when the annual real estate tax is lower than PLN 100). Individuals owning a real estate are subject to the tax. Tax authority issues every year a decision that determines the subjectivity to the tax and the amount of the real estate tax.
Basis of tax
Real estate tax is calculated on the basis of a quota rate on every 1m2 of usable area of buildings and its parts and on 1m2 of ground.
Companies
Applicable tax rates are determined individually by every authorised municipality in the form of resolution.
Liability to tax
Real estate tax is paid in twelve instalments. Legal persons owning real estates are subject to tax, which is paid on the basis of the submitted tax return.
Basis of tax
Real estate tax is calculated on the basis of a quota rate on every 1m2 of usable area of buildings and its parts and on 1m2 of ground. As far as legal persons are concerned, structures (fences, roads, car parks, tanks, etc.) are also subject to tax. Real estate tax is a tax-deductible expense for a person performing business activity. Usually, it is charged to tenants.
Minimum corporate income tax
| Taxpayer | Basis of tax | Tax levied | Tax rates (2024) |
|---|---|---|---|
| Resident company | Initial value of real estate | Corporate income tax | 10% |
| Non-Resident company | Initial value of real estate | Corporate income tax | 10% |
Individuals
The minimum corporate income tax will not be paid by individuals.
Companies
The minimum corporate income tax will be paid by companies, fiscal unities and establishments of foreign entrepreneurs which in the tax year:
- suffer a loss from a source of income other than capital gains, or
- the proportion of income to revenues (other than from capital gains) was less than 2% (some costs and revenues are excluded).
Exclusions would apply, i.a. for companies that registered a 30% decrease in revenues based on year-to-year data, start-ups and small taxpayers.
Liability to tax
The minimum corporate income tax has to be paid. The deadline for paying the minimum tax is the end of the third month the following year. The payment to the office is subject to the excess of the minimum tax over the CIT calculated on general principles.
The minimum corporate income tax is neutral for profitable companies because minimum tax can be deducted from payments of corporate income tax in the period of 3 tax years.
Basis of tax
The tax rate is to be 10%, and the tax base is to be the sum of:
- 1.54% of the value of the company's revenue (other than from capital gains);
- costs of debt financing incurred for the benefit of related parties exceeding 30% of the so-called EBITDA of the taxpayer plus;
- costs of intangible services or rights (similar in scope and definition to the existing Article 15e) incurred for the benefit of related parties exceeding PLN 3 million plus 5% of the so-called EBITDA.
The taxpayer can choose a simplified method of determining the tax base. In case of choosing this method the tax base is an amount corresponding to 3% of the revenue value earned by the taxpayer in the tax year from a source of revenue other than capital gains.
The taxpayer informs about the choice of such a method of determining the tax base in the CIT-8 return, submitted for the tax year for which the choice was made.
Exemptions
Regulations concerning minimum corporate income tax have been suspended until December 31, 2023. Therefore, companies were not obliged to pay minimum corporate income tax in 2022 and 2023.
Companies, after meeting the conditions, will be obliged to pay minimum corporate income tax for the first time for 2024.
Shifted income tax
| Taxpayer | Basis of tax | Tax levied | Tax rates (2024) |
|---|---|---|---|
| Resident company | Costs incurred to related entity | Corporate income tax | 19% |
| Non-Resident company | Costs incurred to related entity | Corporate income tax | 19% |
Individuals
The shifted income tax will not be paid by individuals.
Companies
After meeting certain conditions, costs that were incurred directly or indirectly to related entity in the meaning of transfer pricing regulations can be considered a shifted income.
The costs referred to above include the costs of. i.e. advisory services, market research, advertising services, management and control, all kinds of fees and charges for the use or the right to use rights or intangible assets (e.g. IP rights, know-how, licenses), debt financing as well as remuneration for functions, assets and risk transfer.
Regulations concerning shifted income does not apply if:
- costs have been incurred for the benefit of a related entity that is subject to taxation on its total income in a Member State of the EU or in a country belonging to the European Economic Area and
the related entity conducts actual business activity in that country.
Liability to tax
Taxpayers of the shifted income tax are required to calculate this tax for the tax year in the CIT-8 return and pay it to the tax office's account on the date of submission of this return. The shifted income tax can be reduced by withholding tax remitted on payments under titles listed in Introduction.
Basis to tax
The tax rate is 19%, and a tax base is the sum of the transferred income in the tax year, and in the case of a tax capital group - the sum of the transferred income in the tax year of the companies forming this group.
Polish income tax on revenue from buildings (also called ‘minimum tax’)
| Taxpayer | Basis of tax | Tax levied | Tax rates (2024) |
|---|---|---|---|
| Resident individual | Initial value of real estate | Personal income tax | 0.42% |
| Non-Resident individual | Initial value of real estate | Personal income tax | 0.42% |
| Resident company | Initial value of real estate | Corporate income tax | 0.42% |
| Non-Resident company | Initial value of real estate | Corporate income tax | 0.42% |
Individuals
Buildings - both residential and non-residential, which meet the below-mentioned criteria are subject to tax on revenues from buildings.
Liability to tax
Subject to the tax are buildings that are located in Poland, possessed or co-possessed by the taxpayer, and at least 5% of the usable space of the real estate has been given for use under a rental, lease or other agreement of a similar nature. Minimum tax is calculated and based only on the area of buildings actually subject to lease.
Basis of tax
Taxon revenues from buildings amount to 0.035% of building's worth a month which is 0.42% a year. The tax base is the value of the real estate on the first day of the month as per fixed asset register. The tax allowance is PLN 10 000 000 (ca. EUR 2,3m) and it concerns all related entities and real estates.
Companies
The same rules apply as for individuals.
Retail sales tax
| Taxpayer | Basis of tax | Tax levied | Tax rates (2024) |
|---|---|---|---|
| Resident individual | Retail sales revenue | Retail sales tax | 0.8% /1.4% |
| Non-Resident individual* | Retail sales revenue | Retail sales tax | 0.8% /1.4% |
| Resident company | Retail sales revenue | Retail sales tax | 0.8% /1.4% |
| Non-Resident company* | Retail sales revenue | Retail sales tax | 0.8% /1.4% |
*Retail sales tax is paid only by individuals and companies having retail sale of goods subject to Polish VAT.
Individuals
Retail sales tax is imposed on retailers and covers revenue from retail sales of goods (B2C transactions).
The revenue from retail sales should be estimate on the basis of the total sales recorded on the cash registers.
Liability to tax
The tax obligation arises at the moment of achieving in a given month the revenue exceeding PLN 17 000 000 (ca. EUR 3,9m) and applies to the revenue exceeding that amount achieved from that moment until the end of the month.
Taxpayers are obliged to calculate and pay tax for monthly settlement periods.
Basis of tax
The tax base is the surplus of revenues from retail sales over PLN 17 000 000 (ca. EUR 3,9m) achieved in a given month.
The tax is progressive with two tax rates:
0.8% of the tax base - in the part in which the tax base does not exceed PLN 170 000 000 (ca. EUR 38,9m);
1.4% of the excess of the tax base over PLN 170 000 000 - in the part in which the tax base exceeds PLN 170 000 000.
Companies
The same rules apply as for individuals.
Vehicles for Polish real estate
Commonly used vehicles for Polish real estate
Limited
A limited liability company (in Poland: spółka z ograniczoną odpowiedzialnością - sp. z o. o.) is a private limited company which has legal personality. The company itself is a separate entity from the company's stakeholders. Income tax is paid both at the level of the company (corporate income tax) and at the level of the company's stakeholders - here the tax is levied on a profit distribution (dividend).
Partnership & joint ventures
Real estate may be owned either by an individual or a private limited company (i.e. limited liability company or public corporation). Many entities can invest in real estate. There is no distinction between taxation of joint ventures, individuals or partnerships.
Limited partnerships
Limited partnership is a partnership which has got no legal personality (in Poland: spółka komandytowa - sp. k.). Two categories of partners are distinguished: general partners (responsible for the company’s obligations without any restrictions) and limited partners (responsible for the company’s obligations only to the level of a limited liability amount). By establishing a limited partnership, partners determine the amount of contributions, the limited partner determines additionally the limited liability amount.
Limited partnerships are corporate income tax payers.
The profits achieved by the limited partners are double-taxed - once when they are achieved by the partnership and a second time when they are paid to the partners (as in case of a limited liability company).
The amendment provides for the exemption of an amount equal to 50% of the revenue obtained by a limited partner from a share in the profit of a limited partnership, but not more than PLN 60 000 (ca. EUR 13k). However, the exemption does not apply to all limited partners.
General partners of limited partnerships may deduct from income tax, calculated on income from a share in the profits of a limited partnership, the amount of tax paid by that partnership, in proportion the general partner’s share in such partnership’s profit.
Profit achieved by a limited partnership will be taxed at a rate of 19% or a decreased rate of 9%.
Sole proprietorship
An individual who sells and buys real estate permanently and in an organised manner, should set up a sole proprietorship (in Poland: jednoosobowa działalność gospodarcza) and settle the income and the VAT on the basis of a business activity.
Sole proprietorship is a business activity of an individual who is unlimitedly liable for all the payables, both with sole proprietorship assets and his personal property. The taxpayer, as provided for by law is an individual himself.
Foreign partnership
Non-residents are subject to tax only on the income (revenue) derived in Poland, within the scope of limited tax obligation. Having real estate in Poland leads to a fixed establishment (for VAT purposes) and might lead to the permanent establishment in Poland (for CIT purposes).
The same rules apply to the legal entities and their income derived in virtue of possessed real estates.
Fiscal unity
As provided for by law, it is possible to form a tax capital group (in Poland: podatkowa grupa kapitałowa - PGK) as a result of signing a contract between at least two private limited companies (i.e. limited liability companies or public corporations) that have Polish tax residence and remain in capital relationships. The holding company is required to have a direct shareholding of 75% of the capital of other companies from the group. PGK applies only to corporate income tax. In such a case the group is taxed on the surplus of profits and losses of all entities in the group. In case the group suffers a loss, it dissolves as of the next fiscal year.
Fiscal unity can be also used not only for CIT purposes but also for VAT purposes (under some conditions).
Polish holding company
Limited company can act as holding company if it meets conditioned specified in the definition of holding company:
- holds, directly on the basis of ownership, at least 10% of shares (shares) in the capital of the subsidiary,
- is not a company forming a tax capital group,
- does not benefit from the tax exemptions through activity in the Special Economic Zone or on the basis of a decision on support,
- conducts actual business activity,
- shares (shares) in this company are not held, directly or indirectly, by a shareholder (shareholder) having its registered office or management board or registered or located in countries and territories that engage in harmful tax competition, indicated in the EU list of non-cooperative jurisdictions for tax purposes or with which the Republic of Poland has not ratified an international agreement.
Under some conditions, the Polish holding company would be exempt from tax on:
- dividend (100% value of dividend) obtained from subsidiaries;
- income on a disposal of shares in subsidiaries.
Specific real estate vehicles for Polish real estate
Real estate investment trusts - REIT
Real Estate Investment Trust (REIT) is a special purpose vehicle or investment fund established to invest in the market of commercial and rental real estates (in Poland: firma inwestująca w najem nieruchomosci- FINN), which is a company investing in real estates' rental. Instead of direct purchase of real estate, the purchaser invests his capital in shares of FINN. Frequency of dividend pay-outs is provided for by law. FINN has not become effective in Polish legal system yet.
Funds for joint account
Investment funds may invest directly in proprietary interests, including real estates. They are a type of closed-end investment funds, so that they offer investors investment certificates, that can only be purchased periodically during the usually non-public offer.
Report on execution of a tax strategy
Real property companies, as well as other companies, will be required to prepare and publish a report on execution of a tax strategy if their revenues in the tax year exceed 50m euros. The reports should include, among others:
- the approach to processes and procedures for managing the tax-related obligations,
- the number of provided information on tax schemes,
- the number of provided information on tax schemes,
- transactions with related entities, the value of which exceeds 5% of the balance sheet total,
- submitted applications for a tax ruling, binding VAT rate information (WIS) and binding excise information (WIA)
- restructuring activities planned or undertaken by the taxpayer.
Taxpayers should publish an information on the implemented tax strategy for the tax year (prepared in Polish or its translation into Polish) on their website by the end of the twelfth month following the end of the tax year. Taxpayers should also provide relevant information to the tax office. A consequence of non-compliance with this obligation may result in a penalty of up to PLN 250 000 (ca. EUR 57k).
