Important tax changes expected for real estate companies in Poland from 2021/22


The real estate clause is to be introduced in the Polish-Dutch tax treaty (most likely from 2022) and further changes to the taxation of income from the sale of real estate companies are expected to be implemented in Poland in 2021.

Real estate clause in the Polish-Dutch tax treaty

On October 29, 2020, a protocol was signed on the basis of which the Polish-Dutch tax treaty is to be revised (the changes will most likely be effective from 2022). A major change is the introduction of what is called the “real estate clause”. At present, as long as a Dutch shareholder is managed from the Netherlands and has a relevant substance – office, staff, equipment, etc., a sale of shares in the wealthy Polish real estate company is not taxable. Poland.

According to the amendments, gains made by a Dutch company from the alienation of shares of a Polish entity rich in real estate may be taxed in Poland if, at any time during the 365 days prior to the alienation, those shares have obtained more than 75% of their value coming directly or indirectly from real estate located in Poland. However, pension funds (which are generally tax exempt in their state) may still be subject to tax on income from the alienation of persons rich in real estate only in the country of their residence, and not in the country where the property is located. Exit strategies should be checked as above.

Planned changes to Polish domestic rules

According to a bill, a real estate company will be obliged to settle the corporation tax (IS), or the personal income tax (IRP), advance on the profit obtained by its foreign shareholders from the sale of the properties. shares of this real estate company. In addition, real estate companies will be obliged to publish data on their shareholders and some of them will be obliged to appoint a tax representative in Poland.

The Polish Ministry of Finance justifies that the change will improve the collection and enforcement of taxes, which will be easier once an entity that owns real estate in Poland has a tax issuer. Currently, the bill is being discussed in Parliament and its final version is expected to be released before December 1, 2020.

Definition of a real estate company

A definition of a real estate company will be introduced in the Polish SAI law. A real estate company will be an entity, other than a natural person, required to draw up a balance sheet on the basis of accounting provisions, in which:

  1. On the first day of the tax year, at least 50% of the the market value of its assets, directly or indirectly, were real estate located in Poland or rights to such real estate and the market value of such real estate exceeded 10,000,000 PLN ($ 2.6 million) – in the case of entities starting their commercial activity; and
  2. On the last day of the year preceding the tax year, at least 50% of the book value of its assets, directly or indirectly, were immovable property located in Poland or rights to such immovable property and the book value of such immovable property exceeded 10,000,000 PLN, as well as income from rental, subletting , leasing, subletting and other similar contracts and shares in other real estate companies, made up at least 60% of total income – in the case of other entities.

A real estate company as a taxpayer

If a foreign entity sells at least 5% of the shares of a real estate company, a real estate company will be obliged to pay withholding tax on the profit obtained by the seller. A seller will be obligated to transfer the amount of the tax deposit to a real estate company before the payment deadline.

If a real estate company does not have information on the details of the transaction, the prepayment of tax will be set at 19% of the market value of the shares sold.

Reporting obligations

A real estate company will be required to inform the tax authorities of its direct and indirect shareholders as well as their% of participation. In addition, Polish taxpayers (including those with limited tax liability), who hold at least 5% of the shares, will be required to declare to the tax authorities the amount of their direct or indirect participation in a real estate company.

This provision raises many practical doubts, particularly with regard to listed entities or entities belonging to investment funds. Failure to report may be punishable by certain penalties.

Obligation to appoint a tax representative

Non-Polish companies owning real estate in Poland that are not subject to EU or EEA tax on their entire income, are required to appoint a tax representative, regardless of whether a company real estate either sold or not. The tax representative is jointly and severally liable with a real estate company for tax obligations resulting from the transfer of shares in a real estate company. Failure to appoint a tax representative may result in tax penalties of up to PLN 1 million (€ 230,000).

In addition, the Minister of Finance will publish the individual data of the annual corporate tax declarations of real estate companies and will indicate them by name.

In summary, new provisions can have a significant impact on real estate companies operating in Poland, as well as on their shareholders. There are still a lot of ambiguities which can create doubts of interpretation.

Justyna Bauta-Szostak

ukasz Kupień

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