Depending on the type and intended use of the property, the taxation of the lease may be subject to VAT exemption or taxation at different VAT rates. According to Polish tax authorities, the purpose of the lease is crucial to determine whether the service is exempt from VAT or subject to VAT at the applicable rate (8% / 23%).

Determination of proper VAT rate on rendering services is crucial for determining input VAT deduction rights.

VAT rates on rental services

Taxation of rental services under VAT depends on their classification. In essence, long-term rental services of residential premises for residential purposes are subject to VAT exemption, whereas short-term accommodation services are under an 8% VAT rate. Commercial rent, even if of residential units, is subject to a basic 23% rate.

Type of building

Type of lease

VAT rate

Residential or collective residential

– typical long-term residential lease of residential premises

– accommodation services provided for pupils/students based on an agreement with the school or university


accommodation services (PKWiU 55)


– commercial lease

– intermediaries

– business purpose

– commercial units


Non residential, incl . hotels

accommodation services (PKWiU 55)


commercial lease


VAT exemption for residential lease

The general rule is that residential properties intended for housing purposes benefit from VAT exemption under Article 43, paragraph 1, point 36 of the VAT Act. To qualify for this exemption, three conditions must be met:

  • The rented property must be of a residential character,
  • The lease must be carried out on the lessor’s account,
  • The lease must be carried out exclusively for residential or social housing agency purposes.

Meeting all the conditions above results in the application of the tax exemption, while the failure to meet any condition prevents eligibility for the exemption.

For the application of the exemption, it is crucial to appropriately structure the lease agreement, including provisions indicating fulfillment of those conditions – for example, that it pertains to residential property and can be used solely for residential purposes (see tax ruling of March 19, ref. no. 2021 0113-KDIPT1-1.4012.54.2021.2.ŻR).

The residential purpose

Following the standpoint presented by the tax authorities, the residential purpose shall be understood as the intent to meet the housing needs of the tenant and should not be associated with a temporary stay but rather with permanent residence, signifying the enduring life interest of the person renting the residential unit.

Typically, the residential purpose is associated with a long-duration lease – exceeding 12 months (see tax ruling of March 22, 2023, ref no. 0114-KDIP1-1.4012.121.2022.1.AKA).

Defining the residential character of a property

One of the primary challenges in applying VAT exemptions lies in defining the ‘character’ of the property. The distinction between residential and non-residential spaces, especially when equipped for habitation, introduces a level of ambiguity.

The law does not explicitly specify what ‘residential character’ means, leading to debates about whether the formal character or the actual use by the tenant is determinative.
Under the currently dominant position of tax authorities, leasing non-residential premises for residential purposes, even if serving the satisfaction of housing needs, is not eligible for VAT exemption.

However, a recent verdict from the Regional Administrative Court in Poznań dated August 31, 2023 (I SA/Po 457/23), emphasizes the actual use over the formal character, focusing on whether the tenant genuinely uses the property for residential purposes, regardless of the building’s formal classification. A similar standpoint has already been presented in some tax rulings.

Short-term rental services

On the other hand, short-term rentals are subject to an 8% VAT rate, not qualifying for the exemption.

Short-term rental is often structured as an accommodation service, characterized by a temporary stay and involving various additional services, such as cleaning, washing, and the provision of basic equipment. This is particularly applicable to Airbnb facilities, hostels, hotels, or student houses. Accommodation services fall under the 8% VAT rate and are identified in the VAT Act with reference to the Polish Classification of Goods and Services (PKWiU 55).

The accommodation services are however VAT exempt if provided for pupils/students based on an agreement with the school or university.

In practice, distinguishing between residential leases and accommodation services can be challenging. Considering the tax authorities’ practices, factors that can characterize accommodation services include, but are not limited to:

  • meeting criteria for accommodation services. This concept is not defined in the VAT Act, so linguistic interpretation applies. According to the Polish Language Dictionary PWN, “to accommodate” means “to assign someone a temporary place of residence”,
  • providing premises to individuals staying temporarily, such as students, working individuals, and those staying for business, training, educational, and tourist purposes,
  • classification of the building in Section 12 of the Polish Classification of Construction Objects and Buildings (PKOB),
  • maximum accommodation period: up to 12 months,
  • agreement indicating that the purpose of accommodation is temporary stay,
  • • inability to register for permanent or temporary residence and recognition of the place as neither the main place of residence nor domicile.

Commercial lease

VAT exemption does not cover rental services aimed at non-residential purposes. Court rulings and tax interpretations indicate that if the lease serves economic or business goals, such as commercial activities or profit-making ventures, the exemption does not apply.

Lease of residential buildings, flats, or their parts, when used for purposes other than residential (e.g., office space lease), as well as lease of non-residential buildings, are subject to a 23% VAT rate.

In accordance with the general ruling on the taxation of residential property leases (PT1.8101.2021), the lease of residential premises to companies to provide housing to their employees free of charge is subject to the standard 23% VAT rate. This type of rental is considered a business activity of the company renting the space, regardless of whether the housing needs of the employees are indirectly satisfied. Under a recent judgment of the Administrative Supreme Court of December 12, 2023 (I FSK 281/23), expenses incurred by a company when renting apartments to provide them free of charge to employees are indirectly related to its VAT-taxable activities. Therefore, the company can deduct the input tax resulting from invoices for rent, even though the free provision of premises to the employees is not subject to VAT.

Securing the VAT treatment of rental services

For property owners seeking clarity and stability in VAT treatment of their rental services, it is possible to secure the VAT position by applying for binding rate information (WIS). Received WIS can safeguard the applicable VAT rate for a specific type of lease, ensuring accurate classification of the planned rent in the appropriate group in the Polish Classification of Goods and Services (PKWiU).

WIS is an administrative decision in which the Director of the National Fiscal Information determines the applicable VAT rate for goods or services indicated in the application. The WIS decision binds all tax authorities, which means that the tax authority cannot impose sanctions for applying the VAT rate specified in the WIS. The WIS also binds the recipients of the decision.

However, taxpayers cannot obtain confirmation of eligibility for VAT exemption for long-term rental services in the form of WIS, as WISes can only concern the applicable VAT rate. Consequently, to secure the application for VAT exemption, the landlord should seek an individual tax ruling.

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