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