minimum income tax on commercial propertyOn 1 January 2018, the minimum income tax on commercial property was introduced in Poland. It applies at the rate of 0.035% per month to certain buildings which are worth more than PLN 10 million (roughly EUR 2,400,000) at cost. Now the Polish Ministry of Finance proposed some changes to it.

On 9 April 2018 the lower house of the Polish Parliament, the Sejm published a government-initiated revision of the government bill to amend the Personal Income Tax Act, the Corporate Income Tax Act, and the Flat-Rate Income Tax (Certain Personal Incomes) Act (Bill).

Replacing the minimum income tax on commercial property

The Polish Ministry of Finance plans to amend these regulations to the extent they pertain to the minimum income tax on com

mercial property. The changes come in the wake of consultations with the European Commission on whether or not these regulations constitute unacceptable state aid. The government now wishes to replace the minimum income tax on commercial property with a tax on revenue from buildings (buildings revenue tax).

In accordance with the Bill the new tax will apply to buildings that are tangible assets and meet the following conditions:

  • are owned or co-owned by the taxpayer,
  • have been leased out in whole or in part pursuant to a lease contract (dzierżawa), a tenancy contract (najem) or a similar contract,
  • are situated in Poland.
Changes would become effective on 1 January 2019

Currently the tax applies only to retail and office buildings that are tangible assets, are situated in Poland and are worth more than PLN 10 million (roughly EUR 2,400,000) at cost.

  • The new law changes the application of the PLN 10M exemption threshold. Currently, you can deduct this amount from the taxable basis for each property. After the change, the PLN 10M deduction will be available per taxpayer, i.e. can be made by a taxpayer only once regardless of the number of his buildings (one tax-free amount per taxpayer and not per building).
  • The rate will remain unchanged, i.e. 0.035% of the taxable basis, as in the minimum income tax on commercial property.
  • The new tax will not apply to residential buildings put into service in accordance with central or local government’s social housing programmes.
  • An anti-avoidance clause will be introduced to apply when a taxpayer disposes of or leases his building out in whole or in part without good commercial reasons in order to avoid the buildings revenue tax.
  • The taxpayer will be entitled to request the tax authorities to refund any buildings revenue tax he has paid on top of his corporate income tax.

According to the Bill, the changes would become effective on 1 January 2019. The Bill has just passed its first reading in the Sejm assembled in session.

If you would like to know more about the planned changes to minimum income tax on commercial property in Poland, please visit the homepage of WTS&SAJA Sp. z o.o., the exclusive representative for Poland of WTS Global.

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