Małgorzata Dankowska Partner, Tax Advisor

Tax & Legal Highlights for Real Estate – December 2020

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Important amendments to the CIT Act which will come into force since 1 January 2021

Pursuant to Amendment Act published on 30 November 2020, since 1 January 2021 the following changes will come into force in the scope of the Corporate Income Tax Act (CIT Act):

  • Limited partnerships and selected general partnerships will become a CIT taxpayers – the Amendment Act envisages that revenue generated by a limited partnerships (and some of general partnerships) which so far were tax at level of distribution of profits to its partners will changed into two-stages taxation system (at level of a limited partnership’s income and secondly at the level of profit distribution to its partners).
  • Transfer of the obligation to settle the tax on the sale of shares in real estate companies from the seller to the real estate company.
  • Introduction of new obligations for real estate companies, such as:
    • obligation to appoint a tax representative for non-EU/EEA real estate company. However, this obligation will not apply to real estate companies subject to unlimited tax liability in an EU Member State or in another EEA country. Failure to comply with this obligation will result in a fine on the real estate company in the amount up to PLN 250,000
    • obligation to provide information on shareholders in real estate companies
    • extension of the right to benefit from the exemption from the minimum tax on income from commercial buildings for the period of the epidemic state until the end of the month in which the epidemic state would be revoked.
  • introduction of the obligation to prepare and publish information on tax strategy implementation will apply to:
    • taxpayers whose revenue for a fiscal year exceeded EUR 50 million
    • tax capital groups and their member companies
  • Tax on distribution of assets of a liquidated legal person (fe. In a form of a real estate).
  • Limitation of the possibility of settling tax losses resulting from restructuring activities.
  • Transfer pricing changes – extending the scope of transactions subject to verification with arm’s length principle.
  • Stricter tax depreciation/amortization principles, in particular applicable to CIT-exempt entities.
  • Increase (from EUR 1.2 M to EUR 2M) of the upper limit of revenues from the current tax year to benefit from the reduced 9% CIT rate.

Obligation of a foreign entrepreneur to register in Poland for VAT purposes

Some of the current judgments of administrative courts (e.g. the judgment of the  District Administrative Court in Szczecin of March 5, 2020, I SA / Sz 915/19, the District Administrative Court in Gliwice of March 17, 2020, I SA / Gl 1707 / 19, the Supreme Administrative Court of February 26, 2020, I FSK 1313/17) indicate that the purchase of services in Poland, including warehousing, packing and other support services by entities from other countries may be associated with the creation of a permanent place of business. In the opinion of the administrative courts, inter alia, ensuring access to an IT system or granting a loan to a Polish service provider may already prove the desire for long-term and permanent cooperation. However, the case law in this respect is inconsistent (e.g. the judgment of the Disctrict Administrative Court in Gliwice of February 27, 2019, III SA / Gl 913/18 and December 10, 2018, III SA / Gl 800/18) and in significant number of cases the lack of a fixed place of business was supported, first of all, by the lack of storage space for the sole disposal or decision-making on how to provide storage services.

The assignment of the sales contract is subject to VAT

According to the individual interpretation of the Director of the National Tax Information of July 21, 2020 (no. 0114-KDIP4-2.4012.328.2020.1.MMA), the assignment of rights and obligations in the field of real estate sale agreements to a related entity constitutes the provision of services within the meaning of the VAT Act. In the case at hand, the applicants – entities involved in the implementation of construction projects – concluded an agreement for the assignment of rights and obligations resulting from preliminary real estate sale agreements (including copyright, agreements with the city, administrative decisions, permits). For the assignment, the parties agreed on the remuneration specified in the contract, and the transfer of rights and obligations under the assignment agreement was to be documented by an invoice issued by the assignor. The director of the National Tax Information confirmed that the assignment transaction should be subject to VAT and the assignee will have the full right to deduct input VAT. He justified his position with the fact that the subject of the assignment is a property law that can be precisely defined. The analysed transfer of rights and obligations resulting from the conclusion of the assignment agreement will be a service provided by the assignor to the assignee for remuneration and will be subject to taxation at the appropriate VAT rate.

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