Tax changes for the new year relevant for the real estate sector
Definition of real estate company
A definition of a real estate company was incorporated in the Corporate Income Tax Act.
A real estate company will be:
- with respect to any entities commencing their business activity, an entity in which the market value of real properties located in Poland, which exceeded PLN 10 million, directly or indirectly, constituted at least 50% of the market value of assets as of the first day of the tax or fiscal year,
- with respect to any entities other than the ones specified above, an entity in which the balance sheet value of real properties located in Poland, which exceeded PLN 10 million, constituted at least 50% of the balance sheet value of assets, directly or indirectly, as of the last day of the year preceding the tax or fiscal year, and in the previous year rental income and income from agreements of a similar nature or from transfer of ownership of real properties located in Poland and from interests in other real estate companies constitutes at least 60% of the total income.
Further, the catalogue of income achieved by non-residents, which – as a general rule – are subject to taxation in Poland was expanded by income (revenue) from transfer of ownership of shares (stock), general rights and obligations, participation units or rights of a similar nature in a real estate company. It means that as a general rule any disposal of shares in a real estate company by its foreign shareholder will be subject to taxation in Poland, unless otherwise stipulated by the agreement on avoidance of double taxation concluded between the country of residence of the seller and Poland.
Real estate company as a tax remitter of the income tax related to the disposal thereof
A real estate company will be remitter of income tax related to income achieved from the disposal of its shares (other rights of a similar nature) if:
- the seller is an entity which does not have its seat or management board or place of residence in Poland; and
- the sale transaction will involve shares (stock) which carry at least 5% voting rights in the company or general rights and obligations carrying at least 5% of the rights to participate in profit of a company other than a legal entity, or at least 5% of the total number of participation units or rights of a similar nature, in a real estate company.
If both of the above-mentioned conditions are met, the real estate company will be obliged to pay to the account of the relevant tax office, as a tax remitter, 19% advance towards income tax related thereto, by the 20th day of the month following the month in which income arose. The seller, i.e. the taxpayer, will be obliged, prior to such deadline, to transfer to the real estate company the amount of the tax advance. By the deadline for payment of the tax advance the real estate company will also be obliged to provide the taxpayer with information about the tax advance paid, prepared according to the agreed template.
Interestingly, if the real estate company does not have information about the value of the sale transaction, it will have to pay a tax advance in the amount constituting 19% of the market value of the shares (other rights of similar nature) sold.
New reporting obligation
Both real estate companies and taxpayers holding, directly or indirectly, shares (stock) in a real estate company carrying at least 5% voting rights in a company or general rights and obligations carrying at least 5% of the rights to participate in the profit of a company other than a legal entity, or at least 5% of the total number of participation units or rights of similar nature are obliged to provide the Head of the National Tax Administration, until the end of the third month after the end of the tax or fiscal year of the real estate company, with information in electronic form:
- with respect to information provided by real estate companies: about entities holding, directly or indirectly, shares (rights of a similar nature) in such real estate company, with indication of the number of such rights held by each of them,
- with respect to information provided by taxpayers being shareholders of real estate companies: about the number of shares (rights of similar nature) held, directly or indirectly, in such real estate company
- as of the last day of the tax or fiscal year of the real estate company.
The foregoing means that real estate companies and their shareholders, whether direct or indirect, which will exceed the 5% threshold of the above-mentioned rights will have to submit separate information.
Publication of individual tax data of real estate companies
Individual data of real estate companies included in their tax declarations will be made publicly available at the website of the Ministry of Finance by 30 September.
Published data will include the following:
- business name (name) and tax identification number of the real estate company;
- tax year;
- information about the amount of:
- revenue obtained,
- incurred tax deductible costs,
- income achieved or loss suffered,
- taxable amount,
- amount of the tax due.
Obligation to appoint a tax representative
A real estate company which does not have its seat or management board in Poland and which is not a tax resident of a EU/EEA country will be obliged to appoint a tax representative in Poland. Such tax representative will fulfill, for and on behalf of the real estate company, obligations of a tax remitter referred to above, and will be liable, on a joint and several basis with the real estate company, for the related tax liabilities. If no tax representative is appointed whenever required by law, a penalty of up to PLN 1 million may be imposed upon a real estate company.
Exemption from income tax from commercial buildings
An exemption from income tax from assets constituting buildings for the period from 1 January 2021 until the end of the month in which the state of epidemic will be revoked – if the state of epidemic announced due to COVID-19 continues after 31 December 2020 – was introduced.
Increase of the limit entitling to 9% CIT
The upper limit of income achieved in a tax year entitling to enjoy a reduced CIT rate, i.e. 9%, was increased from EUR 1.2 million to EUR 2 million.
New regulations will enter into force as of 1 January 2021.
Should you wish to discuss the above-mentioned issues, please contact us.
