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Category: Tax newsletter oREty

Get the RET right. The tax side of real estate | June 2022

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Ministry of Finance suggests more changes to income taxes. Following prior announcements, the draft Act of June 27, 2022 Amending the Corporate Income Tax Act and Selected Other Acts has been published recently. It covers the following:

– Postponement (until the end of 2022) and significant modifications of to the minimum tax regulations, especially a rise in the profitability rate (2%) and a change in the method of its calculation, expansion of the list of exemptions (for small taxpayers, municipal companies, taxpayers in bankruptcy or liquidation, taxpayers whose profitability in one of the past three tax years was above the 2% ratio, and taxpayers that earn most of their income in connection with the provision of healthcare services), and introduction of an alternative method for determining the tax base.

– Revocation of the “hidden dividend” regulations.

– Amendments to provisions concerning the taxation of the so-called “shifted income,” especially clarifications of the criteria indicated in the regulations, and introduction of provisions concerning the determination of the tax base.

– Amendments to the settlements of debt financing costs in tax expenses, i.e. making it clear that taxpayers are obliged to exclude – from the tax-deductible costs – the debt financing costs to the extent in which the excess of debt financing costs goes beyond the higher of PLN 3,000,000 or 30% of EBITDA, and the introduction of exemptions to the application of the regulations in situations where the financier is a bank or credit/savings union based in an EU or EEA member state, and in the case of debt financing granted for the acquisition or subscription of shares (or all rights and obligations) in entities that are not affiliated with the taxpayer.

– Amendments to withholding tax (WHT) regulations, i.e. exemption of the application of certain obligations as regards payments related to treasury securities, and extension of the validity term (until the taxpayer’s tax year) of the payer’s statement precluding the obligation to apply the pay-and-refund mechanism.

– Amendments to the regulations on the Polish holding company, involving the relaxation of the conditions for exemption eligibility, incl. granting the holding company with the right to use the CIT exemption on dividends, exemptions for SEZs and the Polish Investment Zone, waiver of the ban on holding over 5% of shares in another company’s share capital and holding all rights and obligations in a partnership, introduction of a 100% exemption on dividends (currently: 95%) and the obligation to apply the pay-and-refund mechanism, expansion of the scope of the application of the regulations to include the simplified joint-stock company, and clarifications of the regulations (incl. the criterion concerning the holding of shares in a subsidiary for one year).

– Simplification of the procedure for reimbursement of the tax on income from buildings by clarifying that the non-deducted amount of tax on income from building is refundable at the request of the taxpayer (with no need for any decision to be issued in that regard), as long as the request does not give rise to any reasonable doubt. 

– Amendments to regulations on foreign controlled corporations (CFCs), incl. the introduction of provisions eliminating double or multiple taxation of CFCs in the case of a series of dividend payments in holding structures, clarifications of the criterion concerning the profitability of a foreign unit in relation to the assets held in connection with the disposal of assets during the year, and clarifications of the “subsidiary” definition.

The draft act is being discussed. It is scheduled to take effect as of January 01, 2023.

The Ministry of Finance has published draft regulations on the jurisdiction of competent authorities with respect to information on real estate companies in PIT and CIT.

The website of the Government Legislation Center has published draft regulations on the jurisdiction of tax authorities as regards the receipt, handling and transfer (to other competent authorities) of the information referred to in article 45 section 3f of the Personal Income Tax Act and article 27 section 1e of the Corporate Income Tax Act, with respect to real estate companies and shareholders/partners thereof.

According to these regulations, the authority receiving information on the shareholding structure of real estate companies under article 27 section 1e item 1 of the CIT Act / article 45 section 3f of the PIT Act would be:

– the head of the tax office with jurisdiction over the real estate company (if the company is a CIT payer) or the address of the real estate company’s registered office (if the company is not a CIT payer); or

– the head of the Third Mazowiecki Tax Office in Radom – if the real estate company does not have an established registered office address in Poland as of the last day of its tax year or financial year.

Information provided by the shareholders/partners of real estate companies under article 27 section 1e item 2 of the CIT Act / article 45 section 3f item 2 of the PIT Act will instead be sent to:

– the head of the tax office with jurisdiction over the address of the registered office / residence of the taxpayer that is a shareholder/partner of a real estate company (if this taxpayer has a registered office address in Poland); or

– the head of the Third Mazowiecki Tax Office in Radom – in the case of shareholder/partners that are legal entities with no registered office address in Poland; or

– the head of the Third Warszawa-Śródmieście Tax Office – in the case of shareholders/partners who are natural persons with no registered address in Poland.

The draft regulations are being discussed.

The rent for leasing a plant will be regarded as a hidden profit under article 28m section 3, in conjunction with article 28m section 1 item 2 of the CIT Act, and will thus be subject to a fixed-rate tax on the company’s income, according to the advance tax ruling issued on June 07, 2022 by the President of the National Fiscal Information (0111-KDIB1-2.4010.103.2022.4.AK), thus finding the taxpayer’s position to be incorrect.

In yet another advance tax ruling regarding the interpretation of article 28m section 1 item 2 of the CIT Act, the President of the National Fiscal Information stated that the rent paid by the company to a shareholder for the lease of a property (plant) should be categorized as hidden profit, as defined in article 28m section 3 of the CIT Act. In the tax authority’s view, setting the transaction price (the amount of rent) in line with the arm’s length principle does not automatically mean that other applicable criteria listed in article 28m section 3 of the CIT Law have not been met. The authority found it important that the company does not have its own plant, which is necessary for its business operations, and intends to lease the plant from its shareholders, leading to the conclusion that “the company’s shareholders did not equip the company with the assets necessary for its business operations.”

According to the announcements made by the Ministry of Finance, due to numerous interpretation doubts about the application of these provisions, they are supposed to be revoked.

Tax-deductible costs cannot include depreciation/amortization write-offs made after December 31, 2022 with respect to residential units purchased, leased and entered into the records of fixed assets and intangible assets before January 01, 2022, according to the advance tax ruling issued on June 06, 2022 by the President of the National Fiscal Information (0115-KDIT3.4011.417.2022.2.AD).

The tax authority did not share the taxpayer’s opinion that the solution adopted by the lawmaker contradicts the principle of protection of acquired rights and the principle of protection of ongoing interests, arising from the principle of a democratic state and article 2 of the Constitution, thus finding the taxpayer’s position to be incorrect. Consequently, it has been confirmed that after December 31, 2022, taxpayers will lose the ability to categorize depreciation/amortization write-offs as tax deductible-expenses, even if these pertain to incompletely depreciated residential units entered into the fixed asset register before January 01, 2022.

The use of the dividend exemption for dividends paid before 2022 does not rule out the possibility of using the preference option for holding companies, according to the advance tax ruling issued on May 12, 2022 by the President of the National Fiscal Information (0111-KDIB1-3.4010.162.2022.1.IZ).

One of the conditions for using the preferential tax regime for holding companies is (article 24o section 1, in conjunction with article 24m item 1.c of the CIT Act) the non-application of the dividend taxation exemption discussed in article 22 section 4 of the CIT Act. In an advance tax ruling issued by the President of the National Fiscal Information, it was confirmed that the use of the dividend taxation exemption before January 01, 2022, i.e. prior to the effective date of the holding company regulations, does not preclude the possibility of tapping into the exemption from taxation on profits from the sale of shares in a subsidiary. Starting from January 01, 2022, taxpayers have to choose whether they will take advantage of the exemption from taxation on the sale of shares or, alternatively, the exemption from taxation on dividends, as referred to in article 22 section 4 of the CIT Act.

In case the changes announced by the Ministry of Finance come into effect, it is possible that both of the aforesaid preferential option could be applied concurrently.

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

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

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

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

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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

    Get the RET right. The tax side of real estate | December 2021

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    The tax side of real estate. Periodic newsletter for the Real Estate sector.

    The basic designation of land in the Local Spatial Development Plan is decisive for determining the nature of the land as a building area – such conclusions arise from the judgment of the Supreme Administrative Court dated 10 November 2021. (case file no: I FSK 575/18).

    The case concerned a request for tax interpretation in which the Applicant inquired about VAT taxation of three undeveloped plots of land. According to the LSDP, two of the plots are earmarked for non-public green areas and the third one for a multi-family residential development. The SAC stated that in order for a real property to be recognized as a building area, the primary designation of land in the LSDP is decisive. The additional designation is supplementary and admissible, but it does not modify the basic designation in the LSDP.

    “In this respect, it should be noted that the tax authorities – contrary to the SAC- hold that in a situation where the LSDP sets out the permissible designation for development, such plots of land meet the definition of a building area and cannot benefit from the exemption.” – commented Małgorzata Wąsowska, Head of Tax and Tax Advisor at act BSWW legal & tax.

    Pursuant to the general interpretation issued by the Minister of Finance on 15 December 2021 (no  DD5.8203.2.2021) regarding the application of the income tax exemption to income generated from participation in the profits of general and limited partnerships which are taxpayers of income tax, the so-called “dividend exemption” is available with respect to general and limited partnerships to the profits generated by these companies from the moment they became CIT taxpayers. The exemption does not apply to entities which are general partners because the regulations in this respect provide for a different mechanism eliminating the “double” taxation of such a partner’s income.

    In accordance with the general interpretation dated 9 December 2021 issued by the Minister of Finance (no. DCT2.8203.2.2021) concerning the concept of a controlled transaction of a homogeneous nature, in the case of the so-called indirect transactions with domestic entities, the obligation to prepare transfer pricing documentation arises only with respect to the cost side of the transaction. This is justified by the fact that only in respect of cost transactions, where a receivable is paid, it is possible to determine the actual owner of such receivable. The general interpretation also clarified the previously expressed practical issues of homogeneity of transactions, comparability criteria and transfer pricing verification methods.

    “The general interpretation has dispelled frequent doubts arising in practice as to which entities are required to verify the beneficial owner. It is to be welcomed that the scope has been clarified and narrowed with respect to entities paying out receivables.” – commented Szymon Kokot, Tax Advisor at act BSWW legal & tax.

    The remuneration paid to cover the costs related to adapting hotels to the standards of a given brand is an indirect tax deductible cost and should be deducted when incurred, i.e. at the time when the amount of payment is entered into the books, and in the case of its reimbursement, the tax deductible cost is adjusted in the period when the corrective invoice is received – position presented in the tax interpretation of 17 December 2021 (no. 0111-KDIB1-2.4010.558.2021.1.SK).

    The case concerns three companies, where the Applicant (providing hotel management services) undertook to support two interested parties (lessees of the hotel building) with respect to complying with the standards set by the hotel chain and adjusting the building to the requirements of the hotel brand. If the events specified in the contracts, e.g. termination of the contract, occurred – the interested parties agreed to return the support received.

    “The amount of Support Payment is undoubtedly related to the Applicant’s solicitation of potential Interested Parties in order for them to carry out hotel business, and thus is related to the Applicant’s earning of revenue in terms of providing hotel management services to owners or lessees under the concluded HMAs. Therefore, the Support Payment paid by the Company to the Interested Parties may constitute a tax expense. This cost, being related in a general way to the Applicant’s business activities, is an indirect tax deductible cost. It cannot be linked directly to the revenues obtained from the above-mentioned agreements during their duration,” indicated the Director of KIS (National Tax Information Office).

    Performing the function of the president of the management board of a company by a person delegated to do so by the parent company and holding shares in the capital structure of the group does not generate a gratuitous benefit on the part of the company – individual interpretation of December 24, 2021 (no. 0111-KDIB1-2.4010.628.2021.1.BD).

    “In addition, when the function of a member of the board is held by a person who at the same time holds shares in the capital structure of the group to which the company in which the person serves on the board of directors belongs, no income from gratuitous benefits arises on the part of this company. This is due to the fact that the shareholder (direct or indirect) may obtain certain benefits from the company in the future, including, among others, dividends,” explained the Director of KIS.

    Unpaid liabilities of a company existing at the time of its deletion from the KRS register do not generate revenue subject to CIT – tax interpretation of 20 December 2021. (no. 0111-KDIB2-1.4010.503.2021.1.MKU).

    The case concerns a company that purchased land for the purpose of conducting a development project. Due to the pandemic, the company decided not to implement the project, sold the land and started the liquidation process. The company had outstanding loans and interest, which had not been paid at the moment of the deletion of the company from the National Court Register. There was also no statute of limitations, cancellation or other extinguishment of these liabilities.

    “It should be emphasized that the basis for recognizing tax income should always be the occurrence of a real gain on the part of the taxpayer. Such a gain on the part of the Applicant will not occur. At the moment of deleting the Applicant from the register of entrepreneurs of the National Court Register, the Company will cease to exist. Therefore, it will be impossible to attribute to it – as an entity no longer existing – any gain, and thus any revenue on this account. To sum up, the value of the Company’s unpaid liabilities (loans and interest) existing as at the date of completion of liquidation and deletion of the Company from the register of entrepreneurs of the National Court Register will not constitute taxable income for the Company,” commented the Director of KIS.

    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

    NEWSLETTER: The tax side of real estate / November 2021

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    Get the RET right

    The tax side of real estate. Periodic newsletter for the Real Estate sector.

    November 2021

    A spin-off involving the division between the main and additional business activity, accompanied by the lease of a property to an affiliated entity, is not artificial in nature and has a specific economic purpose, according to the ruling issued on November 04, 2021 by the Supreme Administrative Court (case files no. 573/19).

    The company’s object of business was the transport of goods, vehicle repairs, and the sale of automotive parts. In relation to the implementation of a new business strategy, the company decided to separate its main business, i.e. transport services, from other operations, including vehicle repairs and lease of real estate to the parent company. The tax authority considered such actions to be artificial in nature and aimed exclusively at securing a tax advantage, i.e. reduction of revenues by the costs of the lease rent. The Supreme Administrative Court decided, however, that there is, in fact, no tax advantage because the lease rent will act as the cost for the parent company, and as the revenue for the newly-created company, meaning that there is no valid ground to refuse to issue an advance tax ruling.

    VAT obligation emerges upon execution of a report covering the public tender for the sale of real property, according to the advance tax ruling issued on November 22, 2021 by the President of the National Fiscal Information (0111-KDIB3 1.4012.831.2021.1.AB).

    The company had doubts as to when the VAT obligation emerges in relation to the payment of a bid security towards the real estate price. The company believed that such obligation is created on the real estate supply date, i.e. upon execution of the sale agreement in a notarial deed. The tax authority held a different view.

    “In the case at hand, the tax obligation arising from the bid security towards the sale of real estate emerges when the purchaser of the property is selected as part of the procurement procedure, i.e. when a public tender report (discussed in §10 section 1 of the Regulation) is signed. It needs to be noted that when the winning bid is selected, the bid security is credited towards the sale price, i.e. it becomes an advance towards the future supply, which entails a tax obligation in line with article 19a section 8 of the Act. Consequently, when the property acquirer is selected and the public tender report is executed, the established bid security creates a tax obligation with respect to such public procurement procedure.” – concluded the President of the National Fiscal Information.

    Irrespective of whether the Ministry of Finance publishes information about taxpayers whose revenues exceed EUR 50 million, any entity that goes beyond that threshold is obliged to publish its tax strategy until December 31, according to the advance tax ruling issued on November 17, 2021 by the President of the National Fiscal Information (0111-KDIB1-1.4010.363.2021.2.NL).

    The company had doubts as to the new regulations concerning the obligation to publish tax strategies, especially a situation in which the revenue is over EUR 50 million but the company is not listed by the Ministry of Finance. For the President of the National Fiscal Information, it is perfectly clear that the revenues form the deciding factor, which means that the company is obliged to announce its tax strategy.

    “In relation to the obligation to prepare and publish an announcement on the tax strategy for fiscal year 2020 until December 31, 2021, it needs to be noted that if the applicant generated revenues in 2020 in excess of EUR 50 million (converted into PLN on the basis of the average exchange rate published by the National Bank of Poland on the final business day of the calendar year preceding the one in which taxpayers’ individual data is published), then – regardless of whether the applicant’s data is published in the Public Information Bulletin by the minister responsible for public finance or not – the applicant shall be obliged to publish the information referred to in article 27c of the CIT Act at its website, and to communicate such information to the competent tax office until the end of the twelfth month after the end of the fiscal year, i.e. until December 31, 2021. For the purposes of the 2020 tax strategy, only the revenues generated in excess of EUR 50 million in 2020 will be relevant.”

    “We fully endorse the ruling issued by the Supreme Administrative Court – in light of the unequivocal provisions of the PIT Act, there should be no doubt whatsoever that the amount of the contested VAT return can increase the initial value of a fixed asset,” commented Małgorzata Wąsowska, Head of Tax and Tax Advisor at act BSWW legal & tax.

    The real property’s initial value may be increased by VAT whose deduction has been questioned by the tax authority, according to the ruling issued on November 28, 2021 by the Supreme Administrative Court (case files no.  II FSK 219/19).

    The enterprise acquired several buildings and structures, and then applied for a VAT return in relation to that acquisition. Tax authorities challenged the right to deduct VAT, arguing that the properties had been purchased in order to secure a tax advantage. Tax authorities and the Provincial Administrative Court in Gdańsk denied the possibility to include the amount in question in the initial value of fixed assets. However, the Supreme Administrative Court decided otherwise, noting that in such case, the taxpayer had never even held the right to deduct VAT, and consequently, the entire sale price plus VAT (which can be subject to depreciation) should be regarded as the acquisition price and the initial value of the buildings / structures.

    The remuneration of the financial department employees and members of management board can be included in the initial value of a fixed asset, as long it is related directly to an investment project, and can be unambiguously determined and separated to the extent related to such project, according to the advance tax ruling issued by the President of the National Fiscal Information on November 12, 2021 (0111-KDIB2-1.4010.386.2021.1.AR).

    The company constructs and leases residential apartments and commercial premises. It has a finance department and a management board, whose employees/members perform both general tasks and ones related specifically to a given real estate project. Tax authorities believed that the remuneration of employees, to the extent related directly to a fixed asset, should increase its initial value, rather than be recorded as costs on an ongoing basis.

    “The deciding factor for the categorization of a specific expense as a cost of fixed asset generation is the possibility to assign such expense to a specific investment project, i.e. the generation of the fixed asset. (…) The costs of remuneration of the finance department employees involved in tasks related directly to the project should be divided into investment costs (which increase the initial value of fixed assets) and operating costs (in a given period). (…) Among the costs of generation of a fixed asset, the applicant is / will be able to include the aforesaid remuneration of management board members who supervise the investment project, together with other fees linked to such remuneration, i.e. social insurance contributions and payments towards employee capital plans, as long as variable remuneration only concerns the management board members’ actions that have a direct impact on fixed asset generation and the successful completion of the investment project, and the applicant is able to separate the relevant part of the remuneration.”

    Real estate tax about to rise in Warsaw – the City Council has adopted new rates for 2022

    The biggest rise will be recorded by the real estate tax rate related to business operations, from PLN 24.84 in 2021 to PLN 25.74 in 2022 (up by PLN 0.90). The rate applicable to residential units will increase, as well, from PLN 0.85 in 2021 to PLN 0.89 in 2022. Here, the rise is similar to the previous years (in 2019, the rate was PLN 0.79, while in 2020, it reached PLN 0.81).

    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

    Michał Brzozowicz
    Tax Advisor / Attorney-at-law / Senior Associate
    +48 665 667 110
    michal.brzozowicz@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

    NEWSLETTER: The tax side of real estate / October 2021

    Posted on by adminTS

    Get the RET right

    The tax side of real estate
    Periodic newsletter for the Real Estate sector

    October 2021

    Companies that rent apartments for the residential purposes of their employees will have to pay VAT, according to the general ruling issued by the Minister of Finance on October 08, 2021 (PT1.8101.1.2021)
    The ruling concerns taxpayers that rent apartments and then sublease them to others for residential purposes.
    “Summing up, services that consist in the lease of residential property (e.g. apartments) or part thereof, rendered by an active VAT payer to an individual/entity (…) that uses such leased property for the purposes of business operations, e.g. by subleasing it to others for residential use, are subject to taxation at the basic VAT rate,” noted the Minister of Finance.

    It is possible to contest the entries made in the land and building register with respect to buildings through reference to evidence and documents on the basis of which such entries are made, according to the ruling issued on October 13, 2021 by the Supreme Administrative Court (case files no. III FSK 225/21)
    The case concerned a company that owns an office building categorized in the land and building register as a commercial development. The company claimed that in fact, the building serves residential and commercial purposes alike. While the Supreme Administrative Court upheld the prior ruling (which was unfavorable for the company) because the site visit had shown that the building did not actually have a residential function, it nonetheless admitted the possibility to challenge the building categorization in the land and building register if it does not reflect the real status.

    An amount paid for the consent for early termination of a lease agreement should be considered as a fee for services, which is subject to VAT, according to the advance tax ruling issued on September 23, 2021 by the President of the National Fiscal Information (0112-KDIL3.4012.264.2021.1.AW)
    The case concerned an agreement between the lessor and tenants, on the basis of which one of the tenants was obliged to pay a specific fee in return for the lessor’s consent for early termination, and for the resulting waiver of further obligations. The tenant retains the right to deduct VAT. The authority did not provide
    a statement of reasons to the ruling.
    An important issue was brought up by taxpayers that submitted the application for the advance tax ruling: “The legal relationship between X and Y (i.e. the parties to the agreement) involves reciprocal services. It needs to be noted that (as indicated above) Y is going to receive the Fee specified in Agreement II for its consent for X’s sanctionless termination of the Lease Agreement. Consequently, there is a direct and tight link between Y’s consent and the Fee due to Y for that consent.”
    “The ruling confirms the existing practice of tax authorities which assume that payment of a fee for early termination of an agreement should be categorized as services, as long as such fee is intrinsically related to a specific action taken by the other party,” commented Małgorzata Wąsowska, Head of Tax and Tax Advisor at act BSWW legal & tax.

    Real estate tax has to be paid on the entire company building that is included in the register of fixed assets, even if, in fact, only part thereof is used for business operations, according to the rulings issued on October 07, 2021 by the Supreme Administrative Court (case files no. III FSK 121/21 and III FSK 122/21)
    The owner of a wholesale facility was only using part of its building for the purposes of business operations. Nevertheless, after an occupancy permit was obtained, the entire building was listed in the company’s register of fixed assets. The Supreme Administrative Court decided that the actual use of the building was irrelevant because what matters is the fact that it is included in the register of fixed assets. As a result, it is necessary to pay real estate tax on the entire building, at the rate applicable to buildings intended for business activity.

    The value (introduced in 2018) of the excess of financing costs that are not subject to the so-called thin capitalization (article 15c of the CIT Act) is determined as the total sum of PLN 3 million and 30% of taxable EBITDA, according to the ruling issued on October 20, 2021 by the Supreme Administrative Court (case files no. II FSK 390/19)
    As of now, tax authorities tend to assume that the value of the excess of financing costs, which is excluded from the thin capitalization regulations, should be set at PLN 3 million or 30% of EBITDA. On the other hand, administrative courts predominantly decide that such value should correspond to PLN 3 million and 30% of EBITDA.
    “I hope that the favorable (from the taxpayers’ perspective) ruling of the Supreme Administrative Court will be reflected in the approach taken by tax authorities. It needs to be noted, however, that starting from 2022, the value of the excess of financing costs which are not covered by thin capitalization will be set at the higher of PLN 3 million or 30% of EBITDA,” commented Michał Brzozowicz, Tax Advisor at act BSWW legal & tax.

    The municipality’s return of expropriated real estate should not be regarded as a supply of goods and is not subject to VAT because such return is made as part of reinstatement of the pre-expropriation status, according to the ruling issued on October 26, 2021 by the Supreme Administrative Court (case files no. I FSK 119/18)
    The return of real property should not be aligned with the supply of goods, as defined in the VAT Act. Consequently, such return is not VAT-taxable. The amount paid by heirs as part of property restitution is not categorized as compensation.

    The application of PIT exemption (in case of property disposal) as a result of expenses incurred for one’s own residential purposes – categorization of certain costs related to renovation and adaption (fit-out) – the general ruling issued by the Minister of Finance on October 13, 2021 (DD2.8202.4.2020)
    The Minister of Finance has recently issued a general ruling based on which expenses incurred to purchase and install (among others) household appliances, ceiling/wall lighting, kitchen hoods, custom-made furniture and kitchen furniture fit within the definition of costs intended for residential purposes, and can thus be included in the calculation of the tax exemption base.
    “Given their functionality and intended purpose, this equipment should be regarded as an intrinsic part of a residential building (unit). In order for a building (unit) to serve residential premises, it needs to be adjusted to satisfy the basic life needs. It has to be highlighted here that the equipment aimed at fulfilling those needs should not include the so-called “small household appliances,” such as coffee makers, toasters, microwaves, etc. These are just accessories, rather than indispensable elements without which a kitchen would lose its functionality,” concluded the Minister of Finance.
    “In my opinion, this general ruling is a clear sign for taxpayers that will soon be obliged to settle their housing tax relief. Importantly, the Minister of Finance focuses on the social aspects of basic residential purposes (as shown by the coffee maker example), rather than the connection between a specific cost and the real property,” commented Szymon Kokot, Tax Advisor at act BSWW legal & tax.

    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

    Michał Brzozowicz
    Tax Advisor / Attorney-at-law / Senior Associate
    +48 665 667 110
    michal.brzozowicz@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

    NEWSLETTER: The tax side of real estate / September 2021

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    The tax side of real estate
    Periodic newsletter for the Real Estate sector

    September 2021

    Services related to long-term lease should be covered by the 8% VAT rate, according to the so-called “binding rate information” issued on September 20, 2021 by the President of the National Fiscal Information (0112-KDSL2-1.440.103.2021.2.MK).
    The case concerned the VAT rate applicable to the accommodation of students, workers and others.
    “According to PWN [Polish Scientific Publishers] Polish dictionary, to ‘accommodate’ means ‘to provide temporary lodging for someone.’ These services are covered by code no. 55 in PKWiU [Polish Classification of Goods and Services] – Accommodation-related services. The VAT Act sets a preferential VAT rate of 8% for such services – article 41 section 2, in conjunction with article 146aa section 1 item 2 and section 1a of the Act, and item 47 of Appendix 3 to the Act,” noted the President of the National Fiscal Information.
    “Once again the President of the National Fiscal Information confirmed the possibility to apply the 8% VAT rate for services related to the private rented sector,” commented Małgorzata Wąsowska, Head of Tax and Tax Advisor at act BSWW legal & tax.

    Contractual penalties paid for rescission of lease agreements might sometimes be regarded as tax-deductible costs, according to the advance tax ruling issued on August 31, 2021 by the President of the National Fiscal Information (0111-KDIB1-3.4010.498.2017.6.MBD).
    The case concerned a company which concluded (following a thorough analysis) that its operations performed in leased premises might be unprofitable, i.e. may result in losses. The President of the National Fiscal Information confirmed that is such case, the payment of contractual penalties is related to maintaining the source of income, and that article 16 section 11 item 22 of the CIT Act does not apply to those penalties.
    “(…) Given the fact that contractual penalties under lease agreements match the definition of tax-deductible costs discussed in article 15 section 1 of the CIT Act, and do not meet the criteria applicable to the penalties discussed in article 16 section 1 item 22 of the CIT Act, the Applicant will be entitled to categorize them as tax-deductible costs,” concluded the President of the National Fiscal Information.

    In order to apply the housing tax relief before December 31, 2018, it was enough to sign a development agreement and use the funds for residential purposes within 2 years of the date of sale of the previous property, according to the general ruling issued by the Minister of Finance on September 02, 2021 (DD2.8202.1.2021).
    “The right to apply the relief is independent from the final acquisition of the ownership right within the deadline specified in article 21 section 1 item 131 of the CIT Act, effective until December 31, 2018,” noted the Minister of Finance.
    “This general ruling puts an end to the doubts as to whether the final transfer of the ownership right to real estate until the statutory deadline was required in order to tap into the housing tax relief. The ruling confirms the well-established judicial practice in this respect,” commented Jakub Świetlicki vel Węgorek, Tax Advisor at act BSWW legal & tax.

    While selling a real property, a natural person who does not conduct business operations may act as a VAT payer as a result of the powers of attorney and conditions precedent, according to the advance tax ruling issued by the President of the National Fiscal Information on August 31, 2021 (no. 0111-KDIB1-3.4010.498.2017.6.MBD).
    The case concerned a natural person who intended to sell a property and authorized the purchaser to obtain the decisions and permits which constituted the conditions precedent for execution of the final agreement, to obtain the utilities connection conditions, to get a construction permit, and to subdivide the property.
    “It needs to be noted that the actions which have been taken by the Applicant preclude the sale of land lot no. 1 as part of management of private assets. Hence, the aforesaid sale will be deemed to form part of business operations, as discussed in article 15 section 2 of the Act, and the Applicant will be acting as a VAT payer, as referred to in article 15 section 1 of the Act,” noted the President of the National Fiscal Information.

    Establishment of a free-of-charge transmission easement to the benefit of a company shall be regarded as such company’s revenue from free-of-charge services under article 12 section 1 item 2 of the CIT Act, according to the advance tax ruling issued on September 22, 2021 by the President of the National Fiscal Information (0111-KDWB.4010.29.2021.1.ES).
    The case concerned a company which builds heat networks and enters into connection agreements with new recipients. In order for such agreements to be executed, it is necessary to establish transmission easements. The heating system and equipment serve the purpose of supplying heat to recipients, i.e. owners and holders of perpetual usufruct right to properties. Thanks to the easement, the company has the right to enter the land in case of any need to perform inspections, repairs or maintenance. As a result, the company can operate, and the recipients can be supplied with heat, in an uninterrupted manner.
    “Taking the above into consideration, it has to be concluded that establishment of a free-of-charge transmission easement to the benefit of the company, consisting in the right of access to the property and use thereof, generates revenues arising from free-of-charge services under article 12 section 1 item 2 of the CIT Act,” decided the President of the National Fiscal Information.

    Demolition of the acquired buildings in order to implement another project will not entail an obligation to revise input VAT, according to the advance tax ruling issued on September 08, 2021 by the President of the National Fiscal Information (0114-KDIP1-1.4012.362.2021.2.JO).
    The case concerned a taxpayer that intends to acquire developed land in order to implement a new project promptly after demolition of the existing developments. The President of the National Fiscal Information fully shared the taxpayer’s opinion that “there is no obligation to revise input VAT due to demolition of the building or structures; this applies to the VAT amount included in the invoice received from the seller, covering the sale of the assets, deducted in relation to the acquisition thereof.”

    A “structure,” as defined in construction law regulations, may be regarded as a building under the Local Taxes and Fees Act for the purposes of the property tax if it meets the criteria included in the “building” definition provided in that Act, and its distinctive element is the usable area, according to the resolution adopted by the Supreme Administrative Court on September 29, 2021 (case files no. III FPS 1/21).

    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

    Michał Brzozowicz
    Tax Advisor / Attorney-at-law / Senior Associate
    +48 665 667 110
    michal.brzozowicz@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

    NEWSLETTER: The tax side of real estate / August 2021

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    The tax side of real estate
    Periodic newsletter for the Real Estate sector

    August 2021

    The lease of hotel/commercial premises for residential purposes will be subject to VAT and non-exempt, according to the advance tax ruling issued on August 05, 2021 by the President of the National Fiscal Information (no. 0112-KDIL1-2.4012.265.2021.2.DS).
    The case concerned the possibility to apply VAT exemption to the lease of hotel/commercial premises for residential purposes (incl. with respect to students and seconded employees).
    “(…) VAT exemption only applies to the lease of residential properties for residential purposes,” concluded the President of the National Fiscal Information.
    “This advance tax ruling is important with respect to the long-term lease of premises in condo hotels and apartment hotels, especially in terms of the right to deduct VAT related to their construction and acquisition,” commented Małgorzata Wąsowska, Head of Tax and Tax Advisor at act BSWW legal & tax.

    The use of the company’s infrastructure by its manager might sometimes result in the lack of the right to deduct VAT, according to the advance tax ruling issued on August 04, 2021 by the President of the National Fiscal Information (no. 0112-KDIL1-1.4012.368.2021.1.AR).
    The case concerned a natural person who was appointed as a member of the management board, while at the same time performing management services under a separate agreement. Given the fact that pursuant to the agreement, the manager is entitled to use the company’s infrastructure, receives a fixed fee and does not bear liability towards third parties, he was unsure whether he was acting a VAT payer.
    “(…) As part of the agreement with the Company, the Manager is / will be bound by the legal relation with the entity that requests the performance of specific tasks as regards the conditions applicable to such performance, the remuneration and the aforesaid entity’s liability towards third parties,” noted the President of the National Fiscal Information, deciding that the manager does not act as a VAT payer, meaning that the services performed by him will not be covered by VAT.

    A company that leases residential premises to students in its own building should pay the property tax in the same way as for premises intended for business operations, according to the Provincial Administrative Court in Gliwice (judgment of July 14, 2021, case files no. I SA/Gl 487/21).
    The Provincial Administrative Court decided that if the Company had not leased premises, it would not have generated income from business operations. Consequently, the lease of premises for residential purposes is not crucial for taxation purposes.
    “In order to apply an adequate property tax rate, it is vital to take into account the company’s object of business, and (consequently) the role that a residential building (student house) plays in generating the results of such operations, i.e. profits. Without using the residential building or its part, the company will be unable to reach its business goals, meaning that in the case at hand, the building is occupied for the purposes of the company’s business operations,” concluded the Provincial Administrative Court in Gliwice.

    The sale of a share in the perpetual usufruct right to a real property is not regarded as business operations as there are no criteria pointing to the taxpayer’s professional activity, according to the Provincial Administrative Court in Warsaw (judgment of February 10, 2021, case files no. III SA/Wa 658/20).
    The taxpayer wanted to sell the right of perpetual usufruct as part of management of private assets. In relation to the executed lease agreement and the actions taken with respect to the property, the authority decided that the taxpayer acts as an entity that is not subject to VAT.
    “Summing up, it needs to be concluded that under the circumstances specified in the case description, the planned sale of a share in the perpetual usufruct right to the Property will not constitute business operations that are subject to VAT as there are no criteria pointing to the Applicant’s activity that would be comparable to the activity of entities whose professional operations cover such transactions. There are no reasons to believe that such actions are professional, regular and organized in nature,” noted the Provincial Administrative Court in Warsaw.
    “This judgment shows that not every single sale of a real property needs to be automatically regarded as made as part of business operations. It is always necessary to analyze a range of circumstances related to the transaction,” commented Michał Brzozowicz, Tax Advisor at act BSWW legal & tax.

    Income from participation in a limited partnership [spółka komandytowa] through an ordinary partnership [spółka jawna], generated by a natural person, is not subject to the so-called solidarity levy, according to the advance tax ruling issued on June 09, 2021 by the President of the National Fiscal Information (no. 0113-KDIPT2-3.4011.308.2021.1.MS).
    The case concerned a natural person who is a partner in an ordinary partnership and generated income from participation in the profits of a limited partnership (through the ordinary partnership). The authority believes that such income is not included in the taxation base for the purposes of the solidarity levy.
    “The Applicant’s income (revenue) from participation in the profits of a limited partnership, generated through the ordinary partnership, will not be taken into account when determining the taxation base related to the solidarity levy,” concluded the President of the National Fiscal Information.

    Independent residential unit owned by the Company are not regarded as buildings, and are this not covered by income tax on revenues from a fixed asset (building) referred to in article 24b section 1 of the CIT Act, according to the advance tax ruling issued on August 26, 2021 by the President of the National Fiscal Information (no. 0111-KDIB1-2.4010.253.2021.1.ANK).
    The case concerned a company that owns independent residential premises that are successively sold to tenants. While selling those apartments, the company establishes a separate ownership title to them.
    “It needs to be noted that if the tax referred to in article 24b of the CIT Act (effective as of January 01, 2019) was supposed to cover independent residential units that are subject to a separate ownership right, the lawmaker would make that clear through an unequivocal legal regulation that refers specifically to residential units categorized as separate property,” concluded the President of the National Fiscal Information.

    In order to decide that a given entity meets the criteria of a “real estate company,” all applicable statutory requirements have to be fulfilled, according to the advance tax ruling issued on August 24, 2021 by the President of the National Fiscal Information (no. 0111-KDIB1-2.4010.235.2021.1.AK).
    The case concerned an SPV that had doubts as to whether the sale of its shares, held by a Dutch tax resident, will mean that it is subject to CIT in Poland even though it does not generate revenues from lease, and the balance sheet value of the property in the preceding year did not exceed PLN 10 million.
    “Given the fact that the Applicant does not meet the criteria for being classified as a ‘real estate company,’ as defined in article 4a item 35 of the CIT Act, it will not be obliged to pay a tax advance in relation to the Transaction under article 26aa section 1 of the CIT Act,” concluded the President of the National Fiscal Information.

    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

    Michał Brzozowicz
    Tax Advisor / Attorney-at-law / Senior Associate
    +48 665 667 110
    michal.brzozowicz@actlegal-bsww.com

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

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

    NEWSLETTER: The tax side of real estate / June 2021

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    The tax side of real estate
    Periodic newsletter for the Real Estate sector
    June 2021

    It is the taxpayer’s decision whether a leased property belongs to personal assets or is considered as an asset related to business operations, according to the resolution of the Supreme Administrative Court of May 24, 2021 (case files no. II FPS 1/21).
    The case concerned the allocation of lease income to the right source, and its connection with business operations.
    “Lease income (…) is categorized, without any restrictions, as the income source specified in article 10 section 1 item 6 of the Personal Income Tax Act of July 26, 1991 (Dz. U. / Journal of Laws of 2020, item 1426, as amended), unless it has been added by a natural person to assets related to business operations,” concluded the Supreme Administrative Court.

    The lessee’s approval of the lease conditions suggested by the lessor in return for a specific fee shall be regarded as VAT-taxable services, according to the advance tax ruling issued by the President of the National Fiscal Information on February 03, 2021 (no. 0114-KDIP4-1.4012.661.2020.2.AM).
    The case concerned a lessor that agreed to pay a one-off fee to the lessee as an incentive to enter into the lease agreement.
    “The purpose of the incentive is for the lessee to enter into an agreement with the Applicant, rather than any other entity. The incentive is supposed to encourage the lessee to take a specific action, i.e. to execute the lease agreement. In such case, there is a clear relation between the fee paid by the lessor (Applicant) and the lessee’s action (execution of the lease agreement). Consequently, in the case at hand, there is an element of reciprocity, one that is necessary to determine that the payment is, in fact, made for the services performed,” concluded the President of the National Fiscal Information, at the same time confirming the lessor’s right to deduct VAT from the invoice covering the aforesaid incentive.

    The limitation of tax-deductible costs does not apply to services consisting in the management of investment project preparation and implementation, acquired from affiliated entities, according to the advance tax ruling issued by the President of the National Fiscal Information on June 07, 2021 (no. 0111-KDIB1-2.4010.165.2021.1.ANK).
    The case concerned a company established in order to implement a development project. The company was acquiring investment project preparation /
    implementation management services (among others) from affiliated entities, as defined in the CIT Act. The company had some doubts as to whether the aforesaid costs of services, regarded as the expenses discussed in article 15e section 1 item 1 of the CIT Act, capitalized to the initial value of the building recorded as a fixed asset, minus the depreciation write-offs made after the disclosure of fixed assets, and categorized by the company as tax-deductible, will still be considered as tax-deductible upon the sale of the building, whereas the limitation referred to in article 15e section 1 item 1 of the CIT Act will not apply due to the exception offered by article 15e section 11 item 1 of the CIT Act, regardless of the building’s reclassification from inventory (goods) to fixed assets.
    “(…) Investment project preparation and implementation management services (…) are considered as costs related directly to the production of goods (or performance of services), as referred to in article 15e section 11 item 1 of the Corporate Income Tax Act. (…) Such services are vital for the Project and form its inherent part; i.e. if the Company had not acquired the Services, it would not have been able to develop the Project. Given the above, the Applicant’s opinion that (…) the limitation referred to in article 15e section 1 item 1 of the
    CIT Act will not apply due to the exception offered by article 15e section 11 item 1 of the CIT Act, regardless of the building’s reclassification from inventory (goods) to fixed assets, should be considered as correct,” concluded the President of the National Fiscal Information.

    Loans provided by a VAT payer (irrespective of the frequency and purpose of loans, or the PKD [Polish Classification of Business Activity] code) should be VAT-exempt, meaning that they should also be exempt from the tax on civil-law transactions, according to the advance tax ruling issued by the President of the National Fiscal Information on May 05, 2021 (no. 0111-KDIB3-1.4012.117.2021.3.ASY).
    The case concerned a company that was not conducting lending activities, and such operations were not included in its articles of association or its listing in the National Court Register.
    “If a VAT payer grants loans, such actions shall be regarded as taxable, irrespective of the frequency and purpose of the loans, or the borrower’s status. Any loans provided by a business entity in relation to its operations can be identified and categorized as related to such professional operations, which gives rise to VAT obligations, even if such activities are not covered by the entity’s object of business. (…) Given the fact, however, that such services are included in the list provided in article 43 section 1 item 38 of the VAT Act, the loan granted by the Company (Lender) to the Applicant shall be VAT-exempt,” concluded the President of the National Fiscal Information.

    Rescission fee is subject to VAT, according to the advance tax ruling issued by the President of the National Fiscal Information on June 16, 2021 (no. 0113-KDIPT1-1.4012.205.2021.2.MG).
    The case concerned a taxpayer that entered into a preliminary sale agreement in which the parties undertook to execute a final sale agreement within a specific deadline, save that the seller is entitled to rescind the preliminary agreement (until the date specified therein) in exchange for the return of the advance and payment of a rescission fee.
    “(…) It needs to be noted that acceptance of the Seller’s rescission of the sale agreement for a specific fee should be regarded as services, as defined in article 8 section 1 of the VAT Act, meaning that the rescission fee obtained by the Applicant is subject to VAT under article 5 section 1 item 1 of the VAT Act,” concluded the President of the National Fiscal Information.

    A limited partnership may apply the exemption provided in article 22 section 4 of the CIT Act to profits distributed to its limited partner, generated by the partnership after January 01, 2021, according to the advance tax ruling issued by the President of the National Fiscal Information on June 11, 2021 (no. 0111-KDIB1-1.4010.127.2021.2.EJ).
    The case concerned a limited partnership whose limited partner (acting as such for over two years) is a Polish tax resident and CIT payer, holding the right to at least 10% of the partnership’s profits, save that the limited partner’s share in the profits does not result directly from the proportion between the partner’s capital contribution and the total value of all contributions; instead, it results from the limited partnership agreement.
    „(…) The exemption provided in article 22 section 4 of the CIT Act shall only apply to income resulting from a share in profits of a limited partnership or ordinary partnership [spółka jawna], generated from the day when such partnership became a CIT payer,” concluded the President of the National Fiscal Information.

    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

    Michał Brzozowicz
    Tax Advisor / Attorney-at-law / Senior Associate
    +48 665 667 110
    michal.brzozowicz@actlegal-bsww.com

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

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