POLAND Law and Practice Contributed by: Michał Wielhorski, Mateusz Prokopiuk, Małgorzata Wąsowska and Klaudia Michalec, act legal Poland
The requirements for such a permit are strictly defined by law.
As a result, real estate transactions are usually structured as asset deals. For project compa - nies, special purpose vehicles are commonly used, and intra-group transactions often involve corporate reorganisations such as mergers and demergers. 8.3 Municipal Taxes Owners of premises are subject to real estate tax payable with regard to land, buildings and struc - tures, as well as usufruct of land. The annual tax liability on the property depends on the location and type of the property. The rate of real estate tax on structures amounts to 2% of initial value. Moreover, a minimum income tax on earning from buildings was introduced on 1 January 2018 at rate of 0.035% per month of the initial tax value of the buildings (exceeding PLN10 mil - lion). The minimum income tax covers all build - ings located in Poland that are rented, leased, or used on the basis of a similar agreement. 8.4 Income Tax Withholding for Foreign Investors In Poland, withholding tax (WHT) applies to certain income earned by non-residents (eg, dividends, interest or royalties). Entities paying these amounts to non-residents are obligated to calculate, withhold and remit the tax within the appropriate deadline. Income from rental or sale of real estate located in Poland earned by non-residents is not sub- ject to WHT but is taxed under general rules as income earned in Poland by taxpayers with lim - ited tax liability. Rental income is subject to taxa - tion, with the rate depending on the chosen form of taxation. Corporate income may be taxed at CIT rates of 9% or 19%.
8. Tax 8.1 VAT and Sales Tax
The sale of commercial real estate in Poland is generally subject to VAT at the standard rate of 23%. A general VAT exemption applies to real estate supply, except when the supply occurs within the scope of the “first settlement” or when the period between the “first settlement” and the supply date is shorter than two years. This exemption is optional, meaning both the buyer and seller (if active VAT taxpayers) can jointly decide to subject the transaction to VAT. If the exemption does not apply, VAT is charged only if additional VAT exemption conditions are not met – for example, the vendor is not entitled to deduct input VAT on the property or the vendor has not incurred improvement expenses allow - ing for VAT deductions. As mentioned in 6.7 Payment of VAT , the stand- ard VAT rate for commercial properties is 23%, whereas for residential properties it is 8%. If the sale is not subject to VAT, a 2% TCLT on the In Poland, real estate acquisitions are generally subject to TCLT at a 2% rate, applied to the mar - ket value of the property. Share deals are not subject to TCLT. However, in share deal trans - actions, the buyer cannot benefit from property depreciation or recognise the acquisition cost of the real estate, as it is allocated to the shares transaction and recognised under a different income source. property’s market value applies. 8.2 Mitigation of Tax Liability
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