The Polish Deal includes changes, which significantly impact the real estate market. The most important issues cover:
Pursuant to the introduced changes, only depreciation write-offs of fixed assets classified as group 1 of the Classification of Fixed Assets (i.e. buildings, premises, co-operative right to commercial premises and co-operative ownership right to premises), which do not exceed depreciation or amortisation write-offs recognised for accounting purposes (i.e. those charged to the financial result of a given entity), will be tax deductible costs for real estate companies.
In other words, a literal interpretation of the rules may lead to a situation in which a real estate company, which does not currently recognise depreciation for the accounting purposes, will not be able to recognise it for the tax purposes either. This kind of restriction could have a significant impact on the financial position of real estate companies, in which depreciation is one of the main tax deductible items.
As of 1 January 2023 possibility of tax depreciation of residential properties will be excluded. Until that day, tax payers will be allowed to treat the depreciation write-offs on such assets as tax deductible but only with respect to residential properties acquired or constructed by the end of 2021.
It should be noted that the new provisions concern both CIT and PIT taxpayers and do not in fact provide for any grandfathering rules (except for the one mentioned above). This means that in practice as of 1 January 2023 residential properties will not be subject to tax depreciation irrespective when they were constructed or acquired.
As a result of the changes, PIT taxpayers will settle income derived from so-called private rental through the so-called lump sum taxation (i.e. without deduction of related tax deductible costs). The new rules of taxation of rental will be mandatory as of 2023.
It will not be possible to tax income from private rental with 19% flat rate tax or progressive PIT rate (17% and 32%). Consequently, rental income will be taxed with lump sum tax at 8.5% up to the value of PLN 100,000 (c.a EUR 21k) and 12.5% on the excess over PLN 100,000 per year.
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