Real Estate Flash

Expenses incurred for arrangement works (secondary fit-out) in leased premises, not covered by the resale of the outlays, are indirect tax deductible costs. The Suprime Administrative Court (NSA) confirmed that these costs should be recognised in proportion to the length of the lease agreement when two conditions are met: the lease agreement exceeds a tax year and it is not possible to allocate the costs to individual tax periods. In such
a situation, fit-out costs will not be deducted on a singular basis on the date they are incurred.

The Supreme Administrative Court, September 3, 2024

The costs of a discontinued investment may be included in tax deductible costs at the time of a definite decision to abandon the investment, provided that the effect of the expenditure incurred will not be used in the future. It is not necessary to physically dispose of elements of the investment if this would be economically unjustified. The NSA considered that the requirement of the tax authority to destroy fixed assets, regardless of the costs of such disposal, is excessive and has no economic justification.

The Supreme Administrative Court, September 11, 2024

Exchanging assets (real estate) for shares in a capital company constitutes a form of sale of real estate for a consideration to the company and gives rise to tax revenue. The value of this income is equal to the value of the real estate being sold, and it should correspond to the market value (and any surcharge, which does not occur in the case under review). A swap, like a sale, is a form of disposal for consideration, despite the absence of a cash flow. The fact that the assets exchanged have the same value is irrelevant from the legislative perspective.

The Provincial Administrative Court in Warsaw, August 20, 2024

The Court in Warsaw upheld the latest line of case law that expenses incurred to minimise losses may constitute tax deductible costs. The case analysed concerned the amount of compensation paid by the company on the basis of an out-of-court settlement. It emphasised that if a taxpayer considers the continuation of a project to be unpurposeful and loss-generating, the expenses for its termination may be considered tax deductible.

The Provincial Administrative Court in Warsaw, August 20, 2024

The remuneration paid on the basis of a settlement reached with a business partner to settle a dispute may constitute a deductible expense. Such an expense may contribute to securing a source of revenue and is not included in the catalogue of excluded expenses. The court acknowledged that disputes with counterparties, especially foreign ones, are often unavoidable in the conduct of business and do not necessarily result from a faulty proceeding of the taxpayer. Entering into a settlement agreement in order to end the dispute and avoid potentially higher costs is a rational action by the entrepreneur to protect the source of revenue - the Court admitted.

The Provincial Administrative Court in Warsaw, September 12, 2024

The Court in Warsaw agrees with the emerging line of case law that the WHT exemption on the payment of dividends, does not depend on whether the recipient of the dividend is the beneficial owner of the dividend. What is crucial is that the dividend is ultimately taxed within the EU and not transferred to a third country. If the direct recipient of the dividend and the entity to which the dividend ultimately goes are taxed in the EU, the conditions for exemption are met, which should be in line with the intent of the Parent-Subsidiary Directive.

The Provincial Administrative Court in Warsaw, September 12, 2024

Car parks being part of an uncompleted investment intended to create a transport base are subject to property tax as structures related to the conduct of business activities. It is the completion of the construction or the commencement of the use of the facility that determines the tax liability, and not the moment when it is entered in the fixed asset register. The fact that the investment has not been fully completed does not exclude the connection of the car parks to its economic activity, provided they have been built with the intention of using them in this activity.

The Provincial Administrative Court in Wroclaw, September 12, 2024

Hotel services are not subject to tax on revenue from buildings. A contract for the performance of hotel services is not similar to a lease or rental. The revenue from these services is not rental income within the meaning of the real estate company regulations in CIT Act. Consequently, neither the building revenue tax provisions nor the depreciation limits for real estate companies apply to the parts of buildings used for the provision of hotel services.

The Provincial Administrative Courts in Warsaw and in Cracow, September 17-18, 2024

The nature of land in the context of the VAT exemption is determined by its basic (dominant) purpose as defined in the local spatial development plan. The possibility to erect additional buildings on the land is of marginal and subsidiary importance. The supplementary purpose of the land cannot contradict the primary purpose and cannot, so to speak, override the prohibition against building on the land, if such a ban has been established.

The Provincial Administrative Court in Warsaw, August 29, 2024

In 2019, a remitter making payments exceeding PLN 2 million to a non-resident was not obliged to carry out a full verification of the conditions for exemption from withholding tax. This was due to the Decree of the Minister of Finance exempting the application of Article 26(2e) of the CIT Act. It was sufficient to hold the recipient’s certificate of residence and to apply the double taxation treaty. The Court emphasised that although, as a rule, the tax remitter should perform full counterparty verification, simplified counterparty verification rules were still in force in 2019.

The Provincial Administrative Court in Warsaw, September 18, 2024

Fees charged by a hotel for late cancellation of a booking or resignation from an accommodation service are not subject to VAT. These fees have a compensatory function, being a reimbursement for the hotel’s costs and lost benefits. They are not remuneration for services rendered, as no accommodation service is actually provided. Consequently, they do not fall within the catalogue of taxable activities subject to VAT listed in Article 5(1) of the VAT Act.

The Director of the National Fiscal Information, September 2, 2024

The Director of the National Fiscal Information, re-examining the case after the judgment of the Supreme Administrative Court, agreed that the construction of the power unit (power plant) will constitute a project serving the general public interest due to its importance for the energy security of the state and satisfaction of the needs of society in terms of electricity supply. That is, the investment implemented by the applicant will constitute a long-term public infrastructure project as referred to in Article 15c(10) and (8) of the CIT Act. Consequently, the applicant should not include the debt financing costs relating to this investment when calculating the excess debt financing costs.

The Director of the National Fiscal Information, September 4, 2024