Entering the Polish real estate market can be a highly rewarding venture, yet understanding the tax landscape is crucial for investors in the early stages of exploring the market.
If you wish to gather essential information without engaging advisors just yet, this guide – with a collection of tax-focused articles – will help you navigate the various fiscal aspects of real estate investment in Poland at every stage of the investment cycle.
Our goal is to help you navigate the complex world of accounting, tax, and compliance, so you can focus on what you do best – running your business.
Overview of real estate taxation in Poland
Before deciding how to structure your investment, it is crucial to evaluate the tax implications and make an informed decision on how to proceed.
In the article Real estate in Poland you will find a brief overview of how Poland’s tax system works for real estate investors, covering the key aspects connected with key taxes, as well as available tax instruments and reporting obligations.
If your focus is on the Build-to-Rent (BTR) sector, the following article Top 3 tax topics for PRS/BTR in Poland is a must-read. It highlights the key issues to be analysed when familiarising yourself with tax aspects of BTR projects (PRS, PBSA, other).
Entry | asset vs. share deal
When negotiating a Letter of Intent (LOI) for your real estate acquisition process, it’s important to address the key tax points that will shape the deal. The following article provides helpful tips on how to cover critical tax aspects in the LOI, including tax due diligence, acquisition form, tax insurance, split of costs, DTA and LCGT. These tips, which can help streamline the process, are available here: Tax points in LOI.
Once the LOI is signed, the next step is to conduct tax due diligence (tax DD). If you want to receive a tax DD proposal that meets your specific needs, there are several key factors to include in your request for proposal. Drawing from years of experience, we’ve gathered useful tips in this article: How to formulate RfP for tax DD.
While tax DD is often associated with share deals, it is equally valuable in asset deals – particularly due to Poland’s specific VAT regulations. Have you decided to proceed with an asset deal? Discover why tax DD is crucial: Tax DD in asset deals.
Operational phase – key tax considerations
As you reach the operational phase of the investment, several important tax points need to be addressed.
General taxation and “minimal” taxes
Rental income generated from real estate in Poland is taxed locally. For an overview of the general CIT and VAT implications, please refer to our article: Taxation of rental income.
Apart from a regular corporate income tax burden, there are three types of so-called “minimal” income taxes in Poland that you need to consider:
- minimal CIT for buildings (tax on revenues from leased buildings)
- minimal income tax
- top-up tax (resulting from implementation of Pillar 2 regulations)
The minimal CIT for buildings ensures a minimum level of taxation for companies generating rental income from buildings. Its specific structure is explained in more detail in our article Min CIT for buildings.
Though similarly named, the minimal income tax is a distinct levy that does not apply to rental property owners specifically. From 2024, this tax applies to all CIT taxpayers with low profitability or tax losses. For more information, see our article Minimal income tax in Poland.
Lastly, the top-up tax relates to the implementation of the Pillar 2 Directive (GloBE rules) into Polish law, with regulations expected to take effect in 2025. For further details, please see the overview here: Top-up tax: Pillar 2 implementation.
Real estate company – obligations and limitations
A company holding Polish real estate may meet the definition of a Polish real estate company (RECo), even if it is based abroad. RECos, along with their shareholders, are subject to additional tax obligations (including withholding tax at the sale of RECo’s shares) and reporting requirements. Please explore our articles to learn when a company becomes a RECo and what obligations are connected with it:
1) The real estate company in Polish tax law
3) Tax authorities’ new approach to the definition of RECo in 2024
PRS specifics
When operating a Private Rented Sector (PRS) investment, you need to consider several specific tax topics.
VAT regime | 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. Understanding whether the service is exempt or subject to VAT at 8% or 23% is crucial, as this impacts input VAT deduction rights. Learn more in our article: PRS leases: VAT regimes in practice.
VAT rate for collective housing | In recent years, a new interpretative line has emerged regarding conditions for applying the reduced 8% VAT rate for the supply, construction, renovation, or modernization of collective housing buildings. However, these new conditions remain unclear, with conflicting standpoints. For advice on securing the correct VAT position, please read our article: “Which VAT rate for collective housing?”
RET rates | With the arrival of 2024, the Polish PRS sector faces heightened tax risks in real estate tax (RET) due to increased rates and ongoing legal uncertainties regarding whether commercial or residential tax rates apply to PRS buildings. For further details, refer to our article: Higher risk in the PRS sector.
Distribution of profits
Withholding tax (WHT) applies to various passive payments made from Poland to foreign jurisdictions. A few years ago, Poland introduced a so-called “pay-and-refund” system of WHT collection. Under certain conditions, Polish tax remitters are required to withhold tax at the source. To benefit from immediate relief-at-source, additional measures must be put in place. Explore our article to understand how the WHT system operates in Poland: Withholding tax in Poland
The tax on shifted income was introduced to prevent tax avoidance by targeting passive payments made to low-tax jurisdictions or intermediary entities. It primarily applies to Polish companies and non-residents operating through a foreign permanent establishment in Poland and is levied on passive expenses, such as interest and royalties, that are deducted from taxable income. For more information please refer to the article Tax on shifted income.
Divestment – exit scenario
In the exit phase of your real estate investment in Poland, tax efficiency becomes crucial in maximizing returns. Whether you are selling the property through an asset deal or divesting shares in a holding company, understanding the tax implications is essential.
Careful timing and structuring of the exit can significantly impact the tax implications, especially as regards capital gain tax or withholding tax. In this phase, investors should consider both local tax and international tax landscape to plan the overall outcome.
We recommend consulting with tax advisors to tailor an exit strategy that aligns with your tax planning objectives.
How we can help
Navigating the tax aspects of real estate investments in Poland can be challenging, but with the right support, you can ensure that your investments are tax-efficient. As experienced tax advisors, we specialize in providing comprehensive tax services tailored to the needs of real estate investors, making your business easier.
Whether you need help with tax planning, structuring investments, meeting local regulations, or managing tax risks, we’re here to assist. We offer expert advice on property taxes, VAT, capital gains, and international tax considerations, helping you make informed decisions that suit your investment goals.
Need more details? Do not hesitate to check out our scope of services dedicated to the real estate market to learn more.
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