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Income taxes by the private sale of the Polish real estate | Olszewska
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Income taxes by the private sale of the Polish real estate

Magda Olszewska

Last updated: 14.01.2022
Magda Olszewska

Income taxes by the private sale of the Polish real estate

Anyone who wants to sell real estate located in Poland, must follow the Polish tax regulations. The foreigners, who have bought or inherited the real estate in Poland, that they subsequently want to sell, likewise have to consider the Polish tax consequences. In this article we discuss in detail the income tax consequences of the private sale of the real estate located in Poland.

CONTENTS

  1. The Polish real estate & foreign owner – in which country is the sales profit taxable?
  2. Condition for the taxation: Holding period of five years exceeded
  3. The profit on private sale of real estate
    1. Revenues
    2. Costs
  4. Residential relief (‘ulga mieszkaniowa’)
  5. Tax return PIT-39
  6. The Polish real estate & foreign owner – in which country is the sales profit taxable?

    A person, who lives abroad, is usually subject to the unlimited tax liability in the country of their residence. That means, that all the profits of this person are subject to taxation in their country of residence, no matter in which country they were made.

    The sale of the Polish real estate is at the same time subject to taxation in Poland in the light of the Polish tax regulations.

    The regulations on how to avoid the double taxation in such cases are laid down in the so-called Double Taxation Treaties (DTT), bilateral agreements between two countries. The typical solution is there the taxation of the profits from the sale of the real estate in the country, in which the real estate is located.

    In this article we address only the Polish tax consequences of the real estate sale. However, although in those cases the sale profit is subject to taxation in Poland, the tax consequences in the country of the residence should be considered as well. It is possible, that the Polish profit on the sales may have impact on the taxation in the country of residence, i.e., on the progression rates applicable.

    Condition for the taxation: Holding period of five years exceeded

    Not every private sale of real estate is subject to taxation in Poland. The private sale of real estate is only then subject to taxation, if the sale is carried out within five years from the end of the calendar year, in which the real estate was acquired or constructed (art. 10 item 1 sec. 8 lit. a of the Polish PIT Act).

    If the real estate is sold at a later date, it is not subject to taxation.

    If the real estate was acquired by way of succession, the five-year period starts at the end of the calendar year, in which the testator acquired or constructed the real estate. The date, in which the current owner received the inheritance, is not decisive for the determination of the moment of the start of the five-year period.

    If the real estate was acquired to the matrimonial joint ownership or constructed during the duration of the matrimonial joint ownership, and was sold after the matrimonial joint ownership has been dissolved (i.e. by divorce), then the five-years period starts at the end of the calendar year, in which the real estate was acquired to the matrimonial joint property or constructed during the duration of the matrimonial joint ownership. The date, in which the matrimonial joint property was dissolved, and the real estate was transferred to the individual properties of the spouses, is not decisive for the determination of the moment of the start of the five-year period.

    The profit on private sale of real estate

    The profit on the private sale of the Polish real estate is subject to taxation with the tax rate of 19% (art. 30e item 1 of the Polish PIT Act). The sales profit is the difference between the revenues from the sale of the real estate and the costs (art. 30e item 2 of the Polish PIT Act).

    Revenues

    The revenues from selling real property are the sale price specified in the sales contract, net of selling costs..

    As an example, the following costs may be deducted as selling costs:

    • costs of notary,
    • costs of the tax on civil law transactions (PCC),
    • costs of the ads in the press,
    • costs of the property valuation,
    • intermediary's fee.

    If the sale price without justified reason substantially differs from the market value of the real estate, the tax authority may determine the revenue at the market value.

    Costs

    The costs of the private sale of real estate are the documented acquisition or manufacturing costs, increased by documented expenditures, which have increased the value of the real estate, carried out during the ownership of the real estate (art. 22 item 6c of the Polish PIT Act).

    As acquisition costs should be deemed primarily the purchasing price specified in the purchase contract. As the acquisition costs may be also considered the costs of the notary if they were carried by the buyer.

    The amount of the expenditures, which have increased the value of the real estate, should be determined basing on the following documents:

    • the invoices within the meaning of the VAT regulations and
    • the documents confirming that the administrative charges have been incurred(art. 22 item 6e of the Polish PIT Act).

    The expenditures, which have increased the value of the real estate, are therefore generally to be documented with the VAT invoices (‘faktura VAT’). It is not possible, to document those expenditures with receipts (‘paragon’).

    As the expenditures, that have increased the value of the real estate, shall be deemed not only the expenditures, that has increased the value of the building, but also renovation costs. This interpretation results from the standpoints presented by the tax authorities and jurisdiction. The following renovation costs may be unproblematically deducted:

    • internal door,
    • floor panels,
    • shower cabin,
    • tiles in the bathroom,
    • bathroom and kitchen fittings,
    • paint,
    • grout,
    • finishing coats,
    • underfloor heating.

    The acquisition and manufacturing costs are to be increased yearly by the inflation rate (art. 22 item 6f of the Polish PIT Act).

    Residential relief (‘ulga mieszkaniowa’)

    The profit on the private sale of the real estate is tax-exempt, provided it will be used for their own residential purposes within three years from the end of the calendar year, in which the sale was carried out (art. 21 item 1 point 131 of the Polish PIT Act). As an example, the following expenditures shall be deemed as incurred for residential purposes:

    • expenditures for the acquisition or construction of the residential building,
    • expenditures for the renovation of the own residential building,
    • expenditures for the repayment of the credit taken for residential purposes (art. 21 item 25 of the Polish PIT Act).

    If the sales profit is used completely for the residential purposes within the three-year period, there will be no tax due. If the sales profit is used partially for the residential purposes within this period, the profit will be partially tax-free.

    Tax return PIT-39

    The profit on the private sale of the real estate is to be reported in the tax return PIT-39. The tax return PIT-39 is to be submitted until 30. April of the year following the year, in which the sale was carried out.

    The tax is to be paid within the same deadline on the bank account of the tax office.

    How can we help you?

    We specialize in the tax advisory for foreign individuals. If you are interested in our services, please send us a message via our contact form.




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Magda Olszewska

My name ist Magda Olszewska. I’m Polish Tax Advisor and leader of the Olszewska Tax Consulting. I write posts regularly for our blog on the tax issues which we deal with in our praxis.

If you have any questions or would like to inquire about our advisory services, please feel free to contact me.

Magda Olszewska