Tax Highlights
A commission for the assignment of rights and obligations under a development agreement taxed at 23% VAT
According to the judgment of 7 judges of the Supreme Administrative Court of 24 June 2024, ref. I FSK 1661/20, assignments of rights under a development agreement made before the developer issues the premises to the assignor and during the construction of the building, with the assignee paying only a compensation, should be regarded as a supply of services and taxed at a 23% VAT rate.
Draft of a new definition of building and construction for real estate tax purposes
On 17 June 2024, a draft law was published changing the definition of building and structure used for real estate tax purposes. The new definition of building and structure is to no longer include reference to the regulations of the Construction Law.
The concept of a building has been updated to include the entirety of installations ensuring that it can be used for its intended purpose, such as, for example, the installation of electricity, water supply, sewerage, located inside the building and being an integral part of it. These installations will not be taxed separately, as the tax base of a building will be its usable area.
In turn, structures would be regarded as made with the use of construction products:
- objects listed in Annex 4 to the Act, as well as installations and equipment, if they constitute a technical and functional unit with these objects,
- construction parts of equipment that are not part of the structures referred to in letter a,
- construction parts of wind power plants and nuclear power plants,
- foundations for machinery and equipment, technically separate from such machinery and equipment,
- connections to the building.
- For the purposes of the VAT Act, a separate development project under construction constitutes organized part of the enterprise
In a judgment of 19 June 2024, ref. III SA/Wa 849/24, the Provincial Administrative Court in Warsaw stated that in a situation where a taxpayer has separated an unfinished development project, including assets such as land, construction work in progress, rights and obligations under contracts relating to the project and liabilities, as well as plans to make a division by separation, resulting in the transfer of the entire project to the acquiring company, such a project will constitute an organized part of the enterprise within the meaning of the VAT Act, so the acquisition will not be subject to VAT.
Free lending of housing unit to a family foundation is not subject to VAT
In the tax ruling of 12 June 2024, ref. 0113-KDIPT1-1.4012.217.2024.4.RG, the Director of the National Tax Information indicated that lending of residential premises to a family foundation is not subject to VAT, if the taxpayer was not entitled to deduct VAT on the purchase, import or manufacture of the residential premises or their components. In such a situation there will be no taxable activity.
A German company employing a remote worker does not create a permanent establishment for tax purposes in Poland
In a judgment of 24 June 2024, ref. I SA/Gl 1679/23, the Provincial Administrative Court in Gliwice found that only the transfer of work tools (e.g., laptop, phone) by a German company to an employee performing work remotely from the territory of Poland does not create a link to a geographical point and the employee’s apartment cannot be regarded as a permanent establishment of the German company, as a result, no permanent establishment in Poland will arise.
Splitting a monetary receivable into instalments does not take away the right to benefit from the CIT bad debt relief
In the tax ruling of May 27, 2024, ref. 0111-KDIB1-2.4010.159.2024.2.BD, the Director of the National Tax Information indicated that spreading the debt into instalments does not constitute a change in the original payment dates of the debt. In view of this, the taxpayer is entitled to apply the bad debt relief for the entire liability in the tax return filed for the tax year in which 90 days have elapsed from the due date indicated on the invoices.
Company that generates revenue from the provision of hotel and conference services may be regarded as a real estate company
In the tax ruling of 27 May 2024, ref. 0111-KDIB2-1.4010.176.2024.1.ED, the Director of the National Tax Information stated that the main element of a contract for the provision of hotel and conference services is rental, while services provided within the facility and providing complex services are additional to the main function of the service. Hence, revenue from the provision of hotel and conference services should be regarded as rental income, which, once the other prerequisites are met, may mean that the renting entity will be considered a real estate company.
The waiver of the VAT exemption on the supply of real estate also applies to the advance payment
The Supreme Administrative Court in a judgment of 20 June 2024, ref. I FSK 1769/21, pointed out that the submission of a statement on resignation from the VAT exemption for the supply of real estate on the date of the advance payment does not affect the evaluation of the statement’s effectiveness. There are no specific regulations that determine the moment of submission of a statement on resignation from exemption in the case of advance payments and the advance payment are treated the same as the main supply. Consequently, the advance payment received should be subject to VAT.
Legal Highlights
Work on the draft amendment to the Construction Law – proposed changes to the notification procedure for houses of up to 70 m2
Draft Law on Amendments to the Construction Law and Certain Other Laws dated 21 February 2024 (the „Draft„), the objectives and main features of which were presented in the March Real Estate Legal Highlights is still at the stage of arrangements, public consultations and opinions.
A problem that is addressed by the Draft is the procedure for notification of construction under Article 29(1)(1a) of the Construction Law, i.e. the construction of detached single-family residential buildings of no more than two storeys with a build-up area of up to 70 m2, whose area of impact is entirely within the plot or plots on which they have been designed, and the construction is carried out in order to satisfy the investor’s own housing needs.
As it stands now, the verification of the documentation submitted with the notification of the above-described construction is limited – even in the case of a defective notification, the starost is not in a position to object to the notification. Local government officials are therefore deprived of the possibility to react in the situation of receiving incomplete documentation. The lack of the starost’s possibility to raise objections also causes inconvenience on the part of the investor, who, not receiving feedback concerning possible deficiencies in the documentation or their non-compliance with the law, continues with the investment in the belief that it is correct.
The Draft provides for verification of the documentation submitted together with the notification of construction under Article 29(1)(1a), and in the event of failure to meet the statutory requirements (e.g. in the situation of incomplete documents, failure to establish that the construction is carried out in order to satisfy the investor’s housing needs), allows the starost or town’s mayor to object to the notification.
The simplified procedure for the construction of a single-family residential building of up to 70 m2 is not to apply if the relevant documents specified by the regulations are not enclosed, as well as if the architectural-construction administration authority does not establish, on the basis of the documentation, that the project meets the assumptions resulting from Article 29(1)(1a) of the Construction Law. These grounds should result directly from the documentation submitted by the investor, and the authority may not presume such circumstances.
According to the justification of the Draft, the architectural and construction administration bodies reported the need to amend the provisions of the Construction Law so that they would confirm the application of the simplified procedure only to a notification of construction of a facility meeting the assumptions of Article 29 (1)(1a) of Construction Law, pointing to numerous violations in the application of the provision. The submission of the draft to the Council of Ministers is expected to take place in the second quarter of 2024.
The Energy Performance of Buildings Directive (EPBD)
In April 2024, the Council of the European Union adopted amendments to the Energy Performance of Building Directive (EPBD) (the „Directive„). The aim of the new legislation is to continue the introduction of climate-friendly solutions in the building sector, which are supposed to lead to the elimination of fossil-fuel-based heating sources.
Some of the other changes introduced by the Directive to reduce energy consumption, improve energy security, reduce costs related to energy consumption or contribute to climate goals in general are:
- setting minimum requirements for the energy performance of buildings;
- improving the energy performance of buildings with more substantial renovation;
- requiring solar installations in newly constructed buildings;
- adoption of a uniform, common template for energy performance certificates for all EU Member States.
While having a number of objectives and obligations to meet, Member States are free to choose the measures to reduce emissions. However, they are supposed to achieve the targets imposed by the Directive in terms of decreasing energy consumption or emission levels by set deadlines.
The wording of the Directive does not provide for financial penalties for failing to meet obligations or targets set by the Directive within the deadlines. The consequence of Member States delaying implementation therefore appears to be the sheer severity of rising energy prices resulting from increased burdens on fossil fuels.
Moreover, the Directive provides for the provision of support to residents of Member States through the establishment of energy advice centers, where residents will be able to obtain free and comprehensive advice and assistance in the area of improving the energy efficiency of buildings, i.e. presentation of available solutions, sources of support, requirements, support in the preparation of an application for a grant to replace a heat source.
The directive was published in the Official Journal of the EU in May 2024. The changes introduced in the directive will come into force two years after its publication. At the end of Q3/early Q4 2024, the European Commission will issue recommendations on the Directive, which will certainly give hints on how the provisions of the Directive could be implemented in national legal orders.
