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

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

Jakub Świetlicki vel Węgorek
Tax Advisor / Senior Associate
+48 505 703 768

Szymon Kokot
Tax Advisor / Trainee Attorney-at-law / Associate
+48 691 557 507



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