In Polish tax law, the definition of a real estate company plays a key role in the context of tax obligations and reporting. A real estate company is an entity of which more than half of the market value of its assets consists of real estate located in the territory of Poland and whose total value exceeds PLN 10 million. It is worth noting that this definition includes both real estate held directly by the company and that held by its subsidiaries.
Details of the Definition
According to the regulations, for an entity to be considered a real estate company, it must meet several criteria:
1. Asset Structure: At least half of the market value of the company’s assets should consist of real estate located in Poland. These properties may be either owned directly by the company or held by its subsidiaries.
2. Value of the Real Estate: The total value of these properties must exceed PLN 10 million.
3. Income: If the company has been in operation for more than one year, at least 60% of its tax revenue or net financial results should come from real estate activities such as renting, subletting or leasing.
Change in approach to definitions
Recently, interpretations of the regulations on real estate companies have changed. For example, in mid-2023, the Director of the National Tax Information Service (NIT) changed the approach to assessing when an entity can be considered a real estate company. Previously, the carrying value of the shares of real estate subsidiaries was taken into account to assess whether an entity met the definition. However, the KIS now dictates that the actual carrying value of the real estate held by subsidiaries is taken into account, which could significantly affect the classification of more companies as real estate companies.
Confirmation of changes in 2024
This change has been confirmed in successive tax interpretations issued in 2024, which clearly indicate that the carrying value of subsidiaries’ real estate must be taken into account when determining the status of a real estate company. The two most recent interpretations that confirm this change are:
– Individual interpretation of 23 July 2024, ref. 0111-KDIB2-1.4010.180.2024.2.AR,
– Individual interpretation of 2 May 2024, ref. 0111-KDIB1-3.4010.270.2024.1.AN.
Responsibilities and Consequences
Real estate companies and their partners are required to report ownership structures annually to the Head of the National Tax Administration (KAS). Failure to comply with these obligations may result in financial penalties. In addition, in the event of the disposal of at least 5% of the shares by a non-resident, the real estate company acts as the payer and is required to withhold 19% advance income tax on this income.
Conclusion
Changes in the interpretation of the regulations on real estate companies in Poland mean that more and more companies may fall under this definition, which entails additional reporting and tax obligations. It is therefore worth reviewing the company’s asset structure and operations on a regular basis to avoid unpleasant legal consequences.
