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Get the RET right – the tax side of real estate | April – May 2022

On May 12, 2022, the Minister of Health issued a regulation calling off the state of epidemic in Poland, effective as of May 16, 2022. As a result, the exemption from tax on income from buildings ceases to apply as of May 31, 2022 (pursuant to article 38ha of the CIT Act). What this means for CIT taxpayers is the return – starting from June 01, 2022 – of the obligation to calculate the tax on income from buildings for each month and to pay it until the twentieth day of the month following the one for which it is due (the deadline for payment covering June 2022 is July 20, 2022).

In light of the legal status that will come into effect as of January 01, 2023, the costs of leasing a real property from a shareholder will constitute the so-called “disguised dividend,” according to the advance tax ruling issued on April 29, 2022 by the President of the National Fiscal Information (0111-KDIB1-1.4010.94.2022.2.JD).

The case (future event) concerns a company that leases retail and office space from one of its shareholders. The properties were purchased by the shareholder from unrelated parties, and the cost of the lease will not be dependent upon the Company’s profit (or lack thereof) and its value. The President of the National Fiscal Information decided that the new definition of a “disguised dividend” would apply here because the property had been acquired before the Company was established, unless the total sum of the costs incurred by the Company in a financial year, which constitute the disguised dividend, is lower than the gross profit (as defined in accounting regulations) generated in the financial year in which these costs are included in the Company’s financial result.

As a result, the lease-related costs will not be regarded as tax-deductible expenses under the new regulations.

Financial settlements between the parties to a joint venture are not subject to VAT, according to the advance tax ruling issued on May 04, 2022 by the President of the National Fiscal Information (0111-KDIB3- 1.4012.84.2022.1.IK).

The case concerns a transfer of funds resulting from the distribution of profits / coverage of losses between the parties to a joint venture. The parties assume that these activities are technical in nature and do not involve the provision of services or supply of goods. The actions performed as part of the joint venture are primarily aimed at achieving a common goal rather than providing services. The tax authority concluded that in this situation, financial settlements between the parties cannot be treated as the performance of services or supply of goods, and, consequently, they do not constitute activities that are subject to VAT.

“It can be concluded that payments due to the stakeholders are dependent upon the profits generated from the joint venture. Consequently, cash flows resulting from such agreement will not be regarded as payments for the fulfillment of an obligation. This means that such distribution constitutes a technical and accounting action only. There will be no transfer of actual economic control over the goods and no actual performance of services between the parties. It is impossible to identify any financial benefits that would be obtained by each of the parties in relation to the aforesaid settlements. As a result, JV-related settlements between the parties are not subject to VAT,” – concluded the President of the National Fiscal Information.

A lessor that receives a refund of the property tax and perpetual usufruct fee from the lessee should include them together with the rent in a VAT invoice and apply the VAT rate for the lease (the so-called “comprehensive service”), according to the advance tax ruling issued on May 04, 2022 by the President of the National Fiscal Information (0113-KDIPT1 1.4012.184.2022.2.MSU).

The case concerns a taxpayer that leases a warehouse/workshop with office and staff premises. In addition to the rent, the lessee also pays an amount corresponding to the value of the real estate tax and the perpetual usufruct fee. The President of the National Fiscal Information has noted that the perpetual usufruct fee and the real estate tax are directly connected with the lease services, meaning that they are VAT-taxable in the same way as the lease rent.

“Regardless of whether the amount of the real estate tax and the perpetual usufruct fee, returned to the lessor by the lessee, has been included in the rent and constitutes its component, or whether it is separated from the rent, it is always charged to the lessor (…) Consequently, the amounts of the perpetual usufruct fee and the real estate tax constitute the price-generating element of the property lease and are directly connected therewith, meaning that they are subject to VAT in accordance with the rules applicable to the lease services,” – noted the President of the National Fiscal Information.

A VAT invoice cannot be amended/revised in relation to the planned waiver of debt, according to the advance tax ruling issued on May 06, 2022 by the President of the National Fiscal Information (0111-KDIB3-1.4012.234.2022.2.KO).

The case concerns a company which, due to the ongoing armed conflict in Ukraine, is considering the waiver of debt of its Ukrainian partners (at the creditor’s choice and with the debtor’s consent). The President of the National Fiscal Information believes that in this case, the company is not entitled to issue an amended invoice since such waiver cannot be equated with a discount or price reduction.

“The agreement with business partners only concerns the waiver of debt and cannot be regarded as the same as a discount or a price reduction,” – noted the President of the National Fiscal Information.

Receipt of cash due to a partial reduction of a contribution in a limited partnership is categorized as capital gains and is subject to PIT, according to the ruling issued on April 11, 2022 by the Provincial Administrative Court in Gdańsk (case files no. I SA/GD 1700/21).

In the case of a planned return of part of the contribution, resulting from the payment of funds corresponding to the contribution reduction value, PIT-taxable capital gains will emerge for the partner of a limited partnership.

A financial benefit due to the lessor in connection with the relocation, extension, demolition, removal, dismantling or renovation of a building will be subject to VAT, according to the advance tax ruling issued on April 01, 2022 by the President of the National Fiscal Information (0113-KDIPT1 1.4012.80.2022.2.ŻR).

The lessor’s consent for the relocation, reconstruction, demolition, removal, dismantling or renovation of a building/structure in return for a specific fee constitutes a service, as defined in the VAT Act, and is subject to VAT. The tax authority holds that in such case, the payment is, in fact, made for tolerating an act or situation, or for refraining from performing an act. Hence, pursuant to article 106b section 1 of the VAT Act, the lessor is/will be obliged to issue invoices covering this activity.

Need any assistance? Got any questions? Call or e-mail us.

Małgorzata Wąsowska
Certified Tax Advisor / Partner / Head of Tax
+48 691 477 047
malgorzata.wasowska@actlegal-bsww.com

Jakub Świetlicki vel Węgorek
Certified Tax Advisor / Senior Associate
+48 505 703 768
jakub.swietlicki@actlegal-bsww.com

Szymon Kokot
Certified Tax Advisor / Trainee Attorney-at-law / Associate
+48 691 557 507
szymon.kokot@actlegal-bsww.com

Katarzyna Adydan
Certified Tax Advisor / Senior Associate
+48 665 667 110
katarzyna.adydan@actlegal-bsww.com


Get the RET

Jacek Bieniak among the authors of the 8th edition of the commentary to the Commercial Companies Code

The 8th edition of the commentary to the Commercial Companies Code, published by Wydawnictwo C.H.Beck was released to Polish bookstores at the beginning of April. The new edition takes into account the latest amendments to the Code of Commercial Companies, including changes regarding the Act on Public Offering or the conditions regulating the introduction of financial instruments to the organized trading.

Additionally, the commentary presents an overview of all articles regulating a new type of capital company – simplified joint-stock company (P.S.A.).

Jacek Bieniak, managing partner at act BSWW legal & tax, and one of the authors, explained the regulations concerning rights and liabilities of shareholders.

Marek Miszkiel promoted to head the Litigation and Arbitration practice

Huge congratulations to Marek Miszkiel on becoming the new Head of Litigation and Arbitration at act BSWW legal & tax!

Marek joined act BSWW legal & tax legal & tax in 2014. He specializes in commercial disputes and bankruptcy and restructuring proceedings. A certified restructuring advisor. He is also involved in construction disputes, representing clients that operate in the residential, retail and infrastructural sectors.

Marek’s knowledge and experience have been recognized by The Legal 500 EMEA; this year, he is recommended yet again in Dispute Resolution.

act BSWW legal & tax advises STRABAG Real Estate on sale of real estate in Szczecin

In line with its current investment strategy focusing on large development projects located in Warsaw and Kraków, STRABAG Real Estate is selling selected smaller real estate assets in Poland. One of such properties is a land lot in Szczecin, intended for investment purposes.

The law firm guided the client throughout the sale of an investment property in Szczecin, while at the same time providing tax advisory services.

The project team was led by Marek Wojnar, Managing Partner, and Marta Kosiedowska, Partner, supported by Aleksandra Krzemień, Associate. Małgorzata Wąsowska, Partner and Head of Tax, was responsible for the tax side of the transaction.

STRABAG Real Estate is one of the leading developers, operating in 13 European countries. In Poland, the company has constructed and delivered a number of buildings, including the Astoria office project in Warsaw and a hotel for the Motel One operator. With a view to further developing its portfolio, in 2019 the developer bought a downtown Warsaw land lot with the Atrium International office building, followed by the January 2022 acquisition of the land with the Galeria Plaza mall in Kraków. Both buildings are to be demolished and replaced with modern mixed-use developments.

The real estate team at act BSWW legal & tax is one of the biggest among Polish law firms. Our practitioners advise on all types of real estate projects, with a strong focus on large development, retail and office projects. They act for a wide range of international, domestic and regional clients, including developers, property owners, asset managers, investors, lessors and lessees.

act BSWW legal & tax recommended in The Legal 500 EMEA 2022

We are pleased to announce that in the latest edition of The Legal 500 ranking act BSWW legal & tax was distinguished in 7 categories:

  • Construction
  • Capital Markets
  • Real Estate
  • White-Collar Crime
  • Dispute Resolution
  • Commercial, Corporate and M&A
  • Banking & Finance

Furthermore, among the recommended lawyers in this year’s edition are: Marek Wojnar, Michał Wielhorski, Jacek Bieniak, Piotr Smołuch, Piotr Wojnar, Marta Kosiedowska, Katarzyna Marzec, Magdalena Banaszczyk-Głowacka, Michał Sołtyszewski, Janusz Szeliński, Sebastian Sury, Alicja Sołtyszewska, Mateusz Prokopiuk, Piotr Pośnik, Marek Miszkiel, Giuseppe La Rosa, Dominika Michalska oraz Piotr Giżyński.

act BSWW legal & tax advises SATOIA S.A. on purchase and subsequent sale of real estate in Kąty Wrocławskie.

act BSWW legal & tax advised its client on the purchase and subsequent sale of real estate intended for a warehousing and logistics facility in Kąty Wrocławskie, with a total area of over 8 ha.

Our team assisted the client throughout the process of purchasing and then selling the newly-acquired property to 7R Projekt 60 sp. z o.o. The scope of the law firm’s services included the preparation of transactional documentation, supporting the client with ongoing business issues, as well as negotiations and execution of the sale agreements.

The project team was made up of Marek Wojnar (Managing Partner) and Aleksandra Krzemień (Associate).

The real estate team at act BSWW legal & tax is one of the biggest among Polish law firms. Our practitioners advise on all types of real estate projects, with a strong focus on large development, retail and office projects. They act for a wide range of international, domestic and regional clients, including developers, property owners, asset managers, investors, lessors and lessees.

Get the RET right. The tax side of real estate.

Periodic newsletter for the Real Estate sector

It is possible to categorize uncollectible receivables from any type of guarantee issued by a bank (rather than exclusively from loans) as tax-deductible expenses, according to the ruling issued on March 09, 2022 by the Supreme Administrative Court (case files no. II FSK 1553/19).

The Supreme Administrative Court noted that bad debts written off in relation to such guarantees can be recognized as tax-deductible expenses in case the guarantees referred to in article 16 section 1 item 25 c) of the CIT Act are provided not only in connection with a loan, but also for any other purpose. Based on a linguistic interpretation of that provision, the phrase “repayment of loans” refers only to “sureties” and does not apply to “guarantees.”

Repayment of debts secured with a mortgage on a real property directly to the account of the mortgage creditor is regarded as the seller’s income, according to the ruling issued on March 09, 2022 by the Provincial Administrative Court in Gdańsk (case files no. ISA/GD 1062/21).

We cannot rely on the general concept of revenue (i.e. a definite gain) in a case involving disposal for a specific fee because – as specified in article 14 section 1 of the CIT Act, which forms a special provision in relation to article 12 section 1 of the CIT Act and defines the concept of revenue from disposal of items and proprietary rights for a specific fee, the revenue from such disposal corresponds to the value of the item (proprietary right), as expressed by the price specified in the agreement, regardless of the recipient. Consequently, the repayment of mortgage-secured debt to the mortgage creditor is regarded as a gain for the seller of the property.

Loss on the sale of a claim covering a “security deposit” which has not been returned by the contracting party, formerly included in the revenues of the transformed company, may be regarded as tax-deductible expenses of the newly-established private limited liability company, according to the ruling issued on March 08, 2022 by the Supreme Administrative Court (case files no. II FSK 1543/19).

The case concerned the transformation of a sole proprietorship into a private limited liability company. The newly-established company will be entitled to obtain the return of the amount of the security deposit which was retained by the taxpayer’s business partner in order to secure the proper performance of construction works.

The legal predecessor of the private limited liability company recognized the claim as its receivables, meaning that the future event meets the criteria specified in article 16 section 1 item 39 of the CIT Act, according to which tax-deductible expenses do not include “losses on the disposal of claims/receivables for a specific fee, including in the manner specified in article 12 section 1 item 7, except for the claims/receivables or parts thereof which were previously recognized as revenue due – up to the amount formerly recognized as revenue due.” Given the above, a loss resulting from the sale of the aforesaid claims/receivables may be considered as a tax-deductible expense of a sole-shareholder private limited liability company.

Revenue in the form of a free-of-charge benefit emerges upon execution of a suretyship agreement, rather than upon its performance, according to the ruling issued on March 09, 2022 by the Supreme Administrative Court (case files no. II FSK 1615/19).

The company believed that revenues only arise upon performance of a suretyship agreement. However, according to the court, revenues in the form of a free-of-charge benefit emerge earlier, i.e. upon execution of such agreement. Moreover, the court did not share the company’s position that it is not possible to establish the value of the benefit in question, and that there are no regulations which could be used to determine that value. Pursuant to the CIT Act, “the value of in-kind benefits, incl. unpaid ones, is determined on the basis of market prices used for performance of services or provision of items/rights of the same type and category, taking into account their condition, degree of wear, and the time/place.” In the case at hand, the amount and conditions of the loan are clear, which means that there should be no difficulty in establishing the value of remuneration for the surety with respect to a specific borrower and the loan obtained by that borrower.

It is possible to amend the VAT amount incorrectly included in an invoice that allegedly covers non-existent operations if the tax authority has ultimately denied the invoice recipient’s right to deduct VAT, according to the verbal statement of reasons to the ruling issued on March 09, 2022 by the Provincial Administrative Court in Łódź.

The Provincial Administrative Court has decided that if the tax authority denied the recipient of a “fake invoice” the right to deduct input VAT resulting from such invoice, the risk of loss of tax revenues related to the deduction ceased to exist. Consequently, the tax authority cannot refuse the option to amend VAT that was incorrectly specified in the invoice – this goes beyond the prevention of the tax revenue losses because there is no longer any possibility of such losses.

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    Need any assistance? Got any questions? Call or e-mail us

    Małgorzata Wąsowska
    Tax Advisor / Partner / Head of Tax
    +48 691 477 047
    malgorzata.wasowska@actlegal-bsww.com

    Jakub Świetlicki vel Węgorek
    Tax Advisor / Senior Associate
    +48 505 703 768
    jakub.swietlicki@actlegal-bsww.com

    Szymon Kokot
    Tax Advisor / Trainee Attorney-at-law / Associate
    +48 691 557 507
    szymon.kokot@actlegal-bsww.com

    act BSWW legal & tax advises Adventum on acquisition of Sky Tower for over EUR 84 m

    act BSWW legal & tax represented the buyer in the acquisition of an office, retail and residential complex in Wrocław, with a total area of over 171,000 sqm, from Sky Tower S.A., member of Develia Group.

    Our services included a full range of transaction advisory, including due diligence, preparation of transactional documentation and support during negotiations. The law firm also guided the client throughout the financing acquisition process.

    The project team was led by Marta Kosiedowska (Partner) and Marek Wojnar (Managing Partner), supported by Katarzyna Marzec (Partner).

    As regards the acquisition of financing, the client was advised by Marta Kosiedowska (Partner), supported by Mariusz Grochowski (Senior Associate).

    This is yet another property acquired by Adventum over the recent time, and we are more than glad to be able to assist the client at each subsequent stage of its growth. In October, we had the opportunity to advise Adventum on the acquisition of the Mercedes-Benz building in Warsaw, said Marek Wojnar.

    Adventum is definitely growth-oriented, as can be seen from their recent acquisitions. Sky Tower boasts a huge potential and perfectly fits into our client’s development strategy. – noted Marta Kosiedowska.

    Adventum Group is a boutique investment fund management company focused on Central European real estate investment projects. The group has thus far completed projects with a total value of over EUR 1.5bn in the CEE region.

    Sky Tower is one of Poland’s highest developments (212 meters and 50 floors). Apart from over 30,500 m² of leasable office space, the project covers commercial space (25,000 m²), luxury apartments, comprehensive leisure facilities, and a multi-level underground car park.

    The seller and the financing banks were advised by Dentons.

    The real estate team at act BSWW legal & tax is one of the biggest among Polish law firms. Our practitioners advise on all types of real estate projects, with a strong focus on large development, retail and office projects. They act for a wide range of international, domestic and regional clients, including developers, property owners, asset managers, investors, lessors and lessees.

    act BSWW legal & tax advised Sices Polska on the sale of real estate in Kielce

    act BSWW legal & tax advised on the sale of a real estate at Olszewskiego 6 in Kielce to an Italian company, CEAR S.R.L.

    The transaction covers a property with manufacturing facilities and a total area of almost 6 hectares.

    The law firm’s real estate team provided comprehensive advisory services to the seller throughout the transaction, i.e. from negotiations of the transactional documentation (sales agreement and accompanying documents), to closing.

    The project was handled by Jacek Bieniak (Managing Partner) and Aleksandra Krzemień (Associate).

    Sices Polska is a member of Sices Group, operating in the Polish market since 2003. The company specializes in the production and assembly of pressure vessels (reactors, separators, columns) and heat exchangers, as well as the prefabrication of pipelines for the following sectors: Oil & Gas, Chemical & Petrochemical, Energy & Power, Environmental & Recovery.

    CEAR S.R.L. is an Italian company operating in the industrial automation and electrical distribution sector providing comprehensive services in the design, construction, installation and commissioning of power and control panels, and complete industrial automation systems.

    The real estate team at act BSWW legal & tax is one of the biggest among Polish law firms. Our practitioners advise on all types of real estate projects, with a strong focus on large development, retail and office projects. They act for a wide range of international, domestic and regional clients, including developers, property owners, asset managers, investors, lessors and lessees.

    act BSWW legal & tax advises STRABAG Real Estate on acquisition of land with Galeria Plaza (Kraków) building from CP-Plaza sp. z o.o.

    The law firm represented the buyer in the acquisition of the 80,000 sqm property that comes with an appealing location and convenient transport links to the city center.

    act BSWW legal & tax provided comprehensive pre-transactional (including a legal and tax due diligence audit of the property) and transactional assistance (with a strong focus on relations with neighbours and lessees of the shopping mall). We also advised on tax issues, including the preparation of applications for advance tax rulings related to the transaction. The developer’s plans involve the discontinuation and demolition of the existing shopping center, followed by the construction of a mixed-use complex made up of several buildings.

    The transaction team was led by Marek Wojnar (Managing Partner) and Marta Kosiedowska (Partner). Further assistance was provided by Michał Sołtyszewski (Partner), responsible for the legal due diligence process. Małgorzata Wąsowska (Partner) and Jakub Świetlicki vel Węgorek (Senior Associate) provided tax advisory services.
    “We are glad to be witnessing our client’s steady growth. The land lot on which Galeria Plaza is located offers a huge potential, which is yet another reason to be proud of the opportunity to represent STRABAG Real Estate in this transaction,” says Marek Wojnar.

    The seller, Peakside Capital, was represented by Dentons’ real estate team.

    Peakside Capital is an independent investor and manager of real estate projects and investment funds. The company operates predominantly in Central and Eastern Europe and Germany, holding offices in Warsaw, Prague, Frankfurt, Zug (Switzerland) and Luxembourg.

    STRABAG Real Estate is a leading developer, operating in 13 European countries. Its Polish projects include the development of Astoria office building and a hotel for Motel One (both based in Warsaw). With a view to further developing its portfolio, in 2019, the developer bought land that hosts Atrium International office building in downtown Warsaw. By completing the acquisition of land in Dąbie (part of Kraków), the company has embarked on its expansion into regional markets.

    The real estate team at act BSWW legal & tax is one of the biggest among Polish law firms. Our practitioners advise on all types of real estate projects, with a strong focus on large development, retail and office projects. They act for a wide range of international, domestic and regional clients, including developers, property owners, asset managers, investors, lessors and lessees.