Poland: Proposed tax measures concerning real estate industry

The amendments brought by the draft bill are planned to be effective 1 January 2022.

The amendments brought by the draft bill are planned to be effective 1 January 2022.

Proposed tax legislation, released 26 July 2021 for public consultation, includes tax measures that may affect the real estate industry such as:

  • Limitation of tax depreciation in real estate companies: Under the proposed rules, the tax deductibility of tax depreciation write-offs in real estate companies would be limited up to the value of accounting depreciation.
  • Disallowed tax depreciation of residential real estate: Taxpayers would be entitled to recognize costs incurred for acquisition of this real estate asset upon disposal (similarly with regard to a plot of land).
  • Hidden dividend: The proposed rule would exclude from the tax deductible costs, payments made to a shareholder or entity related to the shareholder when generated in an “artificial way” and that may be perceived to be a “hidden dividend”—in particular, payments not related to the business activity, non-arm’s length transactions, over-indebtedness, and use of assets belonging to the shareholder that were previously owned by the company.
  • Thin capitalization rules: The proposed change is intended to clarify that any net financing cost resulting from the thin capitalization rules would be deductible to the greater of: (1) 30% tax on earnings before interest, taxes, depreciation, and amortization (EBITDA), or (2) PLN 3 million.
  • Effective place of management: Under the proposed rule, a company registered outside Poland would be considered a Polish tax resident (under effective place of management concept) when the entity is effectively controlled, governed or managed by persons/entities having a place of residence, a registered office or a management board in Poland. 
  • Polish holding company: If certain conditions are met, a Polish holding company would be exempt from tax on (1) dividends received from its subsidiary up to 95% of the amount (i.e., only 5% of received dividend would be taxed in Poland), or (2) capital gain realised on the disposal of shares in the subsidiary to a non-related entity.
  • Consolidation relief: Taxpayers would be allowed to deduct so-called “qualified expenses” associated with the acquisition of shares from the tax base in the year of acquisition up to the amount of PLN 250,000. The following costs could be considered as “qualified expenses”—costs associated with legal services, valuation (due diligence), interest, transaction taxes, notary and court fees (note that the purchase price for shares would be excluded from “qualified expenses”).

The amendments brought by the draft bill are planned to be effective 1 January 2022.
 

Read a July 2021 report prepared by the KPMG member firm in Poland

 

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