Change of the definition of a real estate company – amendments to the draft bill of 15th September 2020

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During the meeting on October 15, 2020, the Parliamentary Committee od Public Finance considered a draft amendment to tax laws containing an extensive package of tax changes planned for 2021.

As we mentioned in our previous articles, one of the planned changes includes the introduction of an obligation to tax the seller’s income realized on the sale of a real estate company – by such company as the payer. Real estate companies are also to be subject to a number of disclosure obligations.

The current definition of a real estate company contained in the draft bill has not been precise enough – it included entities, in which at least 50% of the balance sheet value of assets was covered by the balance sheet value of real estate located in the territory of the Republic of Poland or rights to such real estate. This definition covered all entities that meet the criterion, regardless of the way of using the real estate and its value.

In the course of the meeting, amendments were adopted to clarify the definition of a “real estate company”.

As a result of the work of the Committee, the real estate companies should cover entities that own real estate with a balance sheet value exceeding PLN 10 million.

Moreover, the definition of a real estate company is to cover those entities whose primary source of income, constituting at least 60% of total income, will be income derived from real estate or rights to real estate, including their sale. This means that this category will be broad and will include – in addition to sales revenues – revenues from rental, sublease, lease, leasing or other contracts of a similar nature. The purpose of adopting such a criterion is to exclude from the definition in question companies that use real estate for their own needs, conducting, for example, production or trade activities.

Currently, the bill is after its first reading in the Sejm.

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