Spouses as a single VAT Taxpayer – what does the CJEU judgement mean for Polish Taxpayers?
On April 3, 2025, the Court of Justice of the European Union (CJEU) issued a significant judgment in the case C-213/24, which may impact the interpretation of Polish VAT regulations concerning spouses selling real estate.
The case involved a Polish married couple who were not engaged in business activity but decided to sell jointly owned property. In preparation for the sale, they hired a professional intermediary to carry out tasks such as dividing the plots and increasing their market appeal. The Polish tax authorities determined that each spouse should be treated as a separate VAT taxpayer. This raised concerns before the national court, which subsequently referred a preliminary question to the CJEU.
The Court stated that where spouses act jointly, share marital property, and undertake preparatory steps for a transaction together, they may be regarded as a single VAT taxpayer. According to the CJEU, such cooperation mirrors the organizational structure of a civil-law partnership, which under Polish law is considered a VAT taxpayer.
TPA Comment:
The CJEU ruling of April 3, 2025 (C-213/24) undermines the previous practice of tax authorities that treated spouses as two independent entities. In light of the aforementioned ruling, spouses acting jointly when selling real estate may be required to:
- register as a single VAT taxpayer,
- obtain a common NIP number,
- issue invoices and submit tax returns as a single taxpayer.
The current provisions of the VAT Act do not currently provide for the possibility of joint registration of spouses as a single taxpayer. In our opinion, the judgment rightly indicates the need for a functional approach to assessing the activities of spouses, taking into account the actual model of cooperation, and not only the formal status of each of them.
The CJEU ruling may therefore indicate the need to amend the regulations – both the VAT Act and the regulations on the identification of taxpayers (e.g., in terms of assigning NIP numbers).
The introduction of such a possibility will also require changes on the part of the tax administration – including adjustment of IT systems and procedures for handling them.
In our opinion, the judgment rightly points to the need for a functional approach to assessing the activities of spouses, taking into account the actual model of cooperation, and not just the formal status of each of them.
Construction abroad: when does a company’s activity constitute a permanent establishment?
In the individual tax ruling issued on March 26, 2025 (ref. 0111-KDIB1-2.4010.65.2025.2.AW), the Director of the National Tax Information Office addressed a key issue regarding when a Polish company’s business activity in Germany gives rise to a foreign permanent establishment.
The case involved a Polish limited liability company registered for VAT purposes, which performs short-term intervention works in Germany such as repairs, maintenance, and machinery overhauls. The company does not have a fixed place of business or personnel in Germany, and all contracts are concluded by its management operating from Poland. Its employees and contractors are Polish tax residents and spend most of the year in Poland.
This raised the question: under these circumstances, does the company’s activity in Germany result in the creation of a permanent establishment as defined by the Polish Corporate Income Tax Act and the double tax treaty between Poland and Germany?
Under Article 5(3) of the double tax treaty between Poland and Germany, the mere presence of a construction or installation site does not create a permanent establishment if it lasts less than 12 months.
The tax authority agreed with the company’s position, concluding that the activities conducted in Germany do not meet the conditions for establishing a permanent establishment. The following factors were crucial:
- works in Germany are incidental and last less than 12 months,
- the company does not maintain a fixed infrastructure or representative there,
- the activities conducted in Germany are neither continuous nor organized in nature.
TPA Comment:
This interpretation confirms the favorable position of the tax authorities with regard to the qualification of activities carried out by Polish companies in the territory of Germany – particularly in the context of the implementation of short-term projects that do not involve the creation of permanent structures (having an office or staff on site). According to its wording, in such cases there should be no creation of a foreign permanent establishment within the meaning of the double taxation treaty between Poland and Germany, and thus – no additional registration and tax obligations in Germany on the part of the Polish taxpayer.
It is worth emphasizing, however, that the assessment of the risk of the establishment always requires an analysis of the specific factual situation – taking into account, among other things, the duration of the project, the nature of the services provided, or the possible presence of subcontractors or the use of foreign technical facilities on German territory. Therefore, it is important to verify the planned model of operation in light of relevant international law.
Such an approach makes it possible to mitigate tax risks and ensure the operational compliance of conducted activities with applicable legal requirements, both on domestic and foreign grounds.
Tenant investment costs: how to recognize cash contributions and fit-out works?
In the recent individual tax ruling dated March 24, 2025 (ref. 0111-KDIB1-2.4010.38.2025.2.ANK), the Director of the National Tax Information Office addressed the taxation of common commercial real estate mechanisms used to incentivize tenants – namely cash contributions and fit-out works. Although these expenditures are lease-related, they are not always directly linked to revenue, which raises questions on how to properly treat them for tax purposes.
The aforesaid case concerned a company entering into long-term lease agreements with tenants, under which in:
- model 1: the tenant independently carries out the fit-out works, and the company provides a fixed budget for this purpose.
- model 2: the fit-out works are carried out by the company at its own expense, for the benefit of a specific tenant—without any financial contribution from the tenant.
Additionally, the company offers a cash contribution, i.e., an one-time incentive payment for concluding or extending a lease agreement.
With regard to these expenditures, the tax authority agreed with the applicant’s position, stating that:
- cash contributions may be recognized as tax-deductible expenses in full, at the time they are incurred, as indirect costs (pursuant to Article 15(4d) of the Corporate Income Tax Act).
- fit-out works, both in model 1 (tenant-performed) and in model 2 (company-performed), may also be treated as indirect tax-deductible costs and recognized in full on the date they are recorded in the accounting books.
TPA Comment:
This ruling is part of a favorable line of interpretation for taxpayers regarding the accounting of tenant incentive instruments popular in the commercial real estate sector – such as cash contribution or financing of fit-out works.
The tax authority assumed that both the one-time incentive payment (cash contribution) and the costs incurred in connection with fit-out works of rental space – regardless of the implementation model adopted – can be considered indirect tax deductible costs, subject to one-time recognition on the date they are incurred. Importantly, this position takes into account the practical realities of long-term rental activity, in which expenses of this kind are an integral part of the strategy for attracting and retaining tenants, but are not always directly related to specific revenues.
It is worth remembering, however, that any qualification of expenses as indirect costs requires proper documentation of the connection with the business, as well as their recognition in accordance with the adopted accounting policy.
Residential property rental in a company re. real estate tax – a change in the tax authorities’ approach following a landmark Supreme Administrative Court verdict
A confirmation of the increasingly established and taxpayer-favorable interpretation of the provisions concerning the taxation of rented residential properties is the recent ruling issued by the Mayor of Wrocław on 4 February 2025 (ref. WPO-DNF.310.1.2025.PP). In this document, the authority affirmed that residential buildings rented out by entrepreneurs — even when forming part of their business activity — should be taxed at the rate applicable to residential buildings, provided that the manner in which the property is used does not result in the loss of its residential character.
This position is fully consistent with the landmark judgment issued by the Supreme Administrative Court in 2023 (case no. III FSK 250/23), which redefined the interpretative boundaries of the concept of “use for business purposes” in the context of real estate tax. In that judgment, the Court emphasized that the mere act of renting a residential property by a business entity does not, in itself, trigger a reclassification for property tax purposes, so long as the property continues to be used as a residential dwelling. According to the reasoning provided, the term “use” should be understood functionally — referring to the actual, predominant use of the property for conducting business activity — which is not the case in the context of standard residential lease arrangements.
As a result, both the above-mentioned local tax authority’s interpretation and the cited judgment of the Supreme Administrative Court significantly reduce the tax risk for entrepreneurs leasing out residential premises, while simultaneously enhancing legal certainty and predictability in the application of tax rates in this area.
TPA Comment
The latest ruling issued by the Mayor of Wroclaw, confirms the well-established favorable line of interpretation, according to which the rental of residential real estate by entrepreneurs – as long as it does not involve its actual use for strictly business purposes – does not change its tax classification. What is crucial is the actual use of the property, not the status of the landlord itself. However, entrepreneurs renting residential property should ensure that the nature of the rental is properly documented each time, in order to minimize the risk of disputes with tax authorities.
