Tax & Legal Highlights for Real Estate – August 2022

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Tax Highlights

  1. WHT payer’s duties when payments to a non-resident do not exceed the limit of PLN 2,000,000
  2. Draft forms for reporting of real estate companies and their shareholders have been published
  3. No possibility of recognizing in full (one-time) in 2022 the costs incurred in previous years, excluded from deductible expenses under Article 15e of CIT Act

WHT payer’s duties when payments to a non-resident do not exceed the limit of PLN 2,000,000

The Voivodeship Administrative Court (VAC) in Poznań issued a judgment, ref. I SA/Po 498/21, concerning the obligations of a withholding tax payer to exercise due diligence stipulated for payments of receivables not exceeding the amount of PLN 2 000 000 within a given tax year.

The Court stated that this obligation cannot be understood as an obligation to take actions reserved for payments of receivables that exceed this amount, for which different rules are provided. VAC held that the authority, in the contested interpretation, unjustifiably extended the obligation of the payer (company) when verifying the conditions for not withholding tax to a detailed verification of the prerequisites referred to in Article 28b Section 4 points 4-6 of the CIT Act also with respect to payments not exceeding PLN 2 000 000 during the tax year.

This means that in the VAC’s view, a taxpayer making distributions of less than PLN 2 000 000 does not have to collect taxpayer declarations on, among other things, the conduct of actual operations in the country of residence or the status of the beneficial owner. This is because the obligation to collect such statements is only provided for in Article 28b(4)(4)-(6) of the CIT Act for the purpose of applying for a refund of withholding tax.

At the same time, however, the issue of what actions should be taken as part of due diligence remains unresolved. Thus, despite favorable judgements that curb the fiscal authorities’ eagerness to overextend the scope of WHT due diligence, we continue to recommend prudent procedures in this regard.

Draft forms for reporting of real estate companies and their shareholders have been published

Real estate companies and taxpayers who are shareholders of real estate companies are required to report certain information regarding the company’s ownership structure to the Head of the National Tax Administration. The information must be submitted as of the last day of the real estate company’s fiscal year and, if the company is not an income taxpayer, as of the last day of its fiscal year. The deadlines for submission of information by real estate companies and their partner taxpayers whose tax year, or fiscal year, ended between 31.12.2021 and 31.05.2022 have been extended until 30.09.2022.

Interactive forms have recently been published that will serve the reporting purpose. Form CIT-N1 deals with information on entities with rights to a real estate company, while form CIT-N2 should indicate information on rights to a real estate company and intermediary entities. In addition, the Decree of the Minister of Finance has been published regarding the designation of authorities competent to receive, handle and make available to other authorities information on real estate companies.

No possibility of recognizing in full (one-time) in 2022 the costs incurred in previous years, excluded from deductible expenses under Article 15e of CIT Act

In an interpretation dated July 21, 2022, ref. 0111-KDIB1-2.4010.286.2022.1.EJ, the Director of the National Tax Information confirmed that the excess of costs incurred before the taxpayer in 2020 and 2021 excluded in those years from deductible expenses under Article 15e Section 1 in conjunction with Article 15e(12) of CIT Act (as in effect until the end of 2021) may not be recognized in 2022 in its entirety (on a one-time basis) as a deductible expense.

Pursuant to Article 15e(9) of CIT Act (as in effect until the end of 2021), the amount of costs not deducted in a given tax year is deductible in the following 5 tax years within the limits applicable in that year. Taxpayers who acquired before the end of the tax year started before 01/01/2022 the right to deduct costs under the above provision retain the right to deduct to the extent and under the rules set forth in this provision. Thus, in tax authorities’ opinion, for the purpose of determining the limit for determining the right to deduct, it should be assumed that Article 15e of CIT Act continues to apply. However, this applies only to the rules for determining the limit for those taxpayers who, before the end of the tax year commenced by 01.01.2022, acquired the right to deduct costs under Article 15e paragraph 9 of the CIT Act.

Legal Highlights

  1. Changes to the Construction Law – digitization of the construction process
  2. Works on amending the law on energy performance of buildings

Changes to the Construction Law – digitization of the construction process

On 20 July 2022 the President of the Republic of Poland signed the Act of 7 July 2022 amending the Construction Law and certain other acts. The amendment introduces a number of changes aimed at digitizing the construction process.

These changes include, first and foremost: allowing the maintenance of a construction log of electronic form in the „EDB” system (electronic construction log), in which the developer will also make the construction log available to participants in the construction process, as well as allowing the maintenance of a construction site book in electronic form in the „EKOB” (electronic construction site book) system. Other change include the regulation of the e-Construction portal (i.e. a government application for submitting applications in the construction process). The act also provides for the creation of the „e-CRUB” system, i.e. the Central Register of Persons Holding Construction Authorizations, which will also contain, for example, information on persons punished due to professional liability. The amendment will also streamline the construction process by making it possible to electronically reconcile a plot or land development project, an architectural and construction project, a technical project and a fire protection device project for compliance with fire protection requirements.

The July amendment also introduces a provision into the construction law that dispels doubts about the need to include connections in the application for a construction permit together with the building. Until now, authorities and courts had interpreted the issue differently, while Article 33(1a) of the Construction Law, added by the amendment, states explicitly that a building permit for a building may not include connections.

Most of the changes took effect by 10 August 2022, while the EDB and EKOB systems will have to wait until 1 January 2023.

Works on amending the law on energy performance of buildings

On 26 July 2022 the Council of Ministers has adopted a draft act amending the act on the energy performance of buildings and the act – the Construction Law. The draft aligns Polish law with European Union regulations on the energy performance of buildings. The new regulations are also driven by the need to improve the effectiveness of the current system for assessing the energy efficiency of buildings in Poland.

The amendment to the Construction Law will primarily include the addition of a new obligation for investors (including developers and individual investors) – specifically, it will be necessary to attach a building energy performance certificate to the notice of completion of construction or application for a occupancy permit.

In terms of the act on the energy performance of buildings, the changes introduced primarily concern raising the requirements related to the inspection of heating systems and air-conditioning systems. The draft also provides for allowing public access to the basic information contained in energy performance certificates through the Central Register of Energy Performance of Buildings. Another important change is the introduction of an obligation for owners, building managers and other entities selling or leasing a building or part thereof to specify in the announcement or advertisement of the sale or lease the indicators of annual demand for usable energy, final energy and non-renewable primary energy, as well as the share of renewable energy sources in the annual demand.

The draft was referred to the Parliament on 5 August 2022, and the act is expected to enter into force six months after the date of promulgation.