Małgorzata Dankowska
Małgorzata Dankowska Partner, Tax Advisor

Tax & Legal Highlights for Real Estate – June 2019

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The tax on commercial real estates may decrease

In the judgment as of May 22, 2019 (case no. III SA/Wa 1903/18), the Voivodship Administrative Court in Warsaw once again confirmed that the tax base in the tax on commercial real estates (so-called: minimum income tax) should be counted on the first day of each month, taking into account both improvements and depreciation write-offs. The first judgment regarding this issue was passed on April 17, 2019 by the Voivodship Administrative Court in Warsaw (case no. III SA / Wa 1905/18). Both judgments relate to the provisions in force until end of 2018, but presented approach should applicable today as well. The amendment to the provisions on the CIT minimal tax, which entered into force on January 1, 2019, did not change the provisions in respect of the tax basis. According to the provisions the tax basis is determined „on the first day of each month”. However, it should be noted that both judgments are not final.


End of declarations, individual account for each and other changes

The government adopted two bills of amendment to the VAT Act. The first assumes combining tax returns with SAF-T file. Thus, a new JPK_VAT file will replace VAT-7, VAT-7K and traditional VAT registers. The changes will come in stages, starting from January 1, 2020, when they will cover the largest entities. Additionally, from January 1, 2020, each taxpayer and tax remitter will pay their taxes (PIT, CIT, VAT and non-tax payments constituting state budget income) to an individual assigned tax account. The second project concerns changes sealing VAT and excise duty, including: the obligation for the buyer to provide a tax identification number (NIP) on tax receipts, liquidation of the subjective exemption from VAT due to the value of sales (up to PLN 200,000) for some taxpayers, changes in the fuel package or changes in the definition of the first settlement. The project assumes the entry of these changes from September 1, 2019 (with some exceptions).


The Ministry of Finance change its approach regarding VAT exemption on residential lease agreements

Recently, it could be noticed that the Ministry of Finance has changed his approach towards the VAT preferences for lease agreements for residential purposes concluded between the business entities. Previously, when the entity rented a flat, which was later disposed to its employees on free of charge basis for the residential purposes, it could be treated as VAT exempt transaction. The tax authorities previously presented standpoint that, an entity could treat lease agreement as VAT exempt also in the case when an agreement is concluded between business entities, provided that the real estate has eventually been used for housing purposes. The different viewpoint has been adopted by the Supreme Administrative Court, in the judgement of 8 May 2018 (case no. I FSK 1182/16), in which it was stated that flats which are available to the entity’s employees are related with its business purposes, not the the employees’ housing purposes. As a result of the judgement, the tax rulings were issued that refuse the right to VAT preferences in case of rental agreement with entity that disposed rented real estate to its employees (no. 0115-KDIT1-1.4012.98.2019.2.JP; 0115-KDIT1-1.4012.61.2019.1.EA, and 0115-KDIT1-1.4012.43.2019.1.JP).


Partnerships pays real estate tax on constructions in a accordance with the market value

The Supreme Administrative Court in the judgement of 4 June 2019 (case no. II FSK 1956/17, and II FSK 1957/17) stated that a limited partnership shall adopt the constructions’ market value as a tax basis for real estate tax purposes. The case referred to the partnership, which was the holder of the building, and upon legal provisions the entity is not the income taxpayer. Consequently, the shareholders, not the entity itself, are authorised to recognize the building depreciation write-offs as tax deductible costs. However, the company claims that since the entity is not allowed to make depreciation write-offs , the tax basis for real estate tax purposes is the market value of the structure. The opposite viewpoint had the Mayors, on which territories the properties are located. Mayors stated that the real estate market value can be applied as the tax basis, only if neither entity nor shareholders are conducting the amortization allowances. Later, the courts of both instances agreed with the entity’s standpoint according to which, it is incorrectly approved that the initial value of the structure is a tax basis even when that the partnership is not making the depreciation write-offs.


MF: two-millionth limit in withholding tax will apply in full

The Ministry of Finance in reply of 3 June 2019 to the question of Dziennik Gazeta Prawna confirmed that payments made from January 1, 2019 until the end of the tax remitters’ year should be included in the calculation of the limit of PLN 2 million. It is irrelevant that the new collection regime on withholding tax will actually apply as of 1 July 2019.


MF: the EU tribunal has not changed settlements in the construction

From the statement published by the Ministry of Finance it results that the VAT settlement of construction services should still be based on the moment when works were submitted for acceptance, instead of signing of the delivery-acceptance protocol – as the CJEU indicated in the judgment of May 2, 2019 (case no. C- 224/18). The Ministry of Finance stated, that this is its preliminary position after analysis of the judgment of the CJEU. It is possible that it will change after the judgment of the Supreme Administrative Court, which file a preliminary ruling request to the CJEU in this case.


Tax free amount of PLN 10m shall be divided between all entities of a capital group

The provisions on the tax on revenues from the commercial buildings (so called: minimum income tax) are still raise concerns of taxpayers. In compliance with the literal wording, a tax free amount of PLN 10m shall be applied only to the entities which have shares in the capital of certain entity (i.e. shareholders). It means that the tax free amount does not refers to the subsidiaries. The tax authorities present different approach, stating that the free amount shall be divided between all members of the group of related entities (no. 0111-KDIB2-1.4010.512.2018.1.MJ, and 0111-KDIB1-1.4010.523.2018.1.ŚS). In the issued tax rulings, the Director of the National Tax Administration refers to the purpose of the introduced provisions and the justification to the to the CIT amendment. According to the justification, in case of capital related entities, the tax free amount shall be divided proportionally between all entities. The main aim of the provisions was to prevent transfer of buildings between related companies to avoid taxation. However, presented by the tax authorities interpretation should be assessed negatively by administrative courts, as it does not find justification in the wording of introduced provisions.


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