New tax rules for real estate companies in Poland
The last two years have brought significant changes to taxation of real estate companies in Poland.
A number of new rules have entered into force, including the adoption of a domestic definition of what constitutes a real estate company, the imposition of new reporting obligations covering shareholder structures, new taxes due on share deals and tax-depreciation limits.
Reporting of shareholding structure
As of 2021, real estate companies in Poland must submit tax information regarding their direct and indirect shareholders, including how many shares or rights they own. The information should be submitted to Polish tax authorities by 31 March (or until the end of 3rd month after the tax year finished, if is not equal with the calendar year). However, this year’s deadline has been prolonged till 30 September 2022. This obligation may seem easily fulfilled, but it may pose challenges for Polish real estate companies that are at or near the bottom of multi-level international tax structures.
Tax remitter on share deals
Polish real estate companies must also now collect tax on share deals. Specifically, a real estate company must now pay the tax on a deal in which the real estate company’s own shares are transferred. The real estate company, then, must gather funds for the tax payment from the shareholder. This is particularly critical in cases where there is a real estate agreement in force between Poland and the home country of the shareholder, for example the Protocol to the Polish-Dutch Double Tax Treaty.
Limits to tax depreciation
The “Polish Deal” includes a rule that limits real estate companies’ right to tax depreciation. According to the new rule, tax depreciation should not be higher than accounting depreciation. The interpretation of the new rule poses challenges in particular when depreciation is not recognised for accounting purposes (that is, in cases where real estate is treated as an investment and valued at arm’s length). In these cases, the question is whether the depreciation can be recognised for tax purposes.
Finally, after a three-year delay, Poland’s WHT pay-and-refund mechanism has entered into force as of 1 January 2022. The WHT standard rate (19 or 20 percent) should be remitted on dividend, interest and royalty payments exceeding PLN 2 million. Polish real estate companies may avoid this tax only if a tax clearance opinion has been obtained from tax authorities or when a special statement under fiscal penal responsibility has been signed by a board member.
Last Updated on April 11, 2022 by Anastazja Lach