News

Advicero Nexia
Home / News / Newsletter Real Estate June 2018

Newsletter Real Estate June 2018

  1. Real Estate Market Forum Sopot
  2. Act on companies investing in the lease of real estate – new draft of law 3
  3. Changes in the minimum income tax on commercial real estate 4
  4. Fit-out works in the rented real estate and the application of reverse charge – the judgment of the Voivodship Administrative Court in Warsaw of 9th May 2018, no. III Sa/Wa 2769/17  5
  5. Disposal of the shopping centre and VAT taxation – judgment of the Supreme Administrative Court of 20th April 2018, no. I FSK 1113/16 6
  6. Determining the tax deductible costs resulting from the sale of real estate transferred to a company as a contribution in kind and qualified as a current asset – the judgment of the Supreme Administrative Court of 23rd January 2018, no. II FSK 3417/17  7
  1. Real Estate Market Forum Sopot

The Real Estate Forum 2018 will be held at the Sheraton Hotel in Sopot this Thursday (7 and 8 June) during which you will meet representatives of Advicero. On the second day of the forum (June 8, Friday) at 11.55 we kindly invite you to take part in the discussion about the ban on Sunday trading, during which one of the panelists will be Katarzyna Klimkiewicz-Deplano – Managing Partner at Advicero. At your disposal are also the Partner – Sławomir Patejuk and Senior Manager – Piotr Zając. Contact us!

2. Act on companies investing in the lease of real estate – new draft of law

On 24th April 2018, a new bill concerning the so-called “REIT” (Real Estate Investment Trust) was published on the website of Government Centre for Legislation. This is the next approach to increase the attractiveness of real estate sector investments in Poland.

The bill provides for the introduction of favourable tax regulations for a companies that invest in residential property (so-called “FINN”), i.e. joint-stock companies whose core business is the lease of residential real estates located on the territory of Poland. According to the above definition, the regulations of the act will not apply to companies whose business operations concern commercial real estates.

According to the draft, FINN will have to meet the following conditions:

  • the company’s seat and management must be located within the territory of Poland
  • company’s shares have been admitted to trading on the official listing market,
  • company has been created for an indefinite period,
  • the company’s capital is at least PLN 50,000,000.00,
  • all shares of the company are bearer shares,
  • the company does not issue preferred shares,
  • the company’s statute specifies the investment policy of the company and its subsidiaries, in particular, the type of property whose lease will be the subject of these companies’ activities, as well as the criteria for the selection of such properties and their valuation.

The draft provides for tax exemptions of FINN’s income until the dividend is paid to the shareholders, not longer than until 12 months following the tax year, as well as the taxation of this income at the rate of 8.5%.

3. Changes in the minimum income tax on commercial real estate

In the April Tax News, we have informed about planned changes regarding the minimum income tax on commercial real estates. Let us remind you that these changes result from consultations with the European Commission and assume:

  • minimum income tax levied only for those buildings (parts of them) that are put into payable use on the basis of a lease, tenancy, etc.;
  • change of the methodology of applying the threshold of PLN 10 million of the value of the building, to which is excluded from the tax basis;
  • to apply the minimum income tax to all buildings (not only commercial ones), with the simultaneous introduction of an exemption for residential buildings put into use as part of governmental and local government programs relating to social housing;
  • introduction of the taxpayer’s possibility to apply to the tax authority for refunding the overpaid minimum tax (over CIT or PIT);
  • the introduction of a special anti-avoidance clause relating to the minimum tax.

The changes are introduced in the form of a self-correction to the draft amendment to act on income taxes of February 2018. Currently, the draft has been forwarded to the President and to the Senate.

4. Fit-out works in the rented real estate and the application of reverse charge – the judgment of the Voivodship Administrative Court in Warsaw of 9th May 2018, no. III Sa/Wa 2769/17

The verdict concerned the following background: the company, as the landlord, concluded rental agreements, on the basis of which it was obliged to carry out fit-out works in rented premises. For this purpose, the company used the services of a construction company.

According to the tax authorities, when the landlord orders the construction company to carry out fit-out works, and the actual beneficiary of these works is the tenant, the construction company should be considered as a
subcontractor. As confirmation, the authorities underlined that the landlord charged the costs of finishing the fit-out works to the tenant through re-invoice. In the tax authorities’ opinion, it means that to settlements between the landlord and the construction company, the reverse charge mechanism should be compulsory applied (i.e. VAT should be settled by the landlord).

The above position was contested by the Voivodship Administrative Court in Warsaw. In the judgment of 9th May 2018, the Court stated that the beneficiary of the services provided by the construction company is the landlord and not the tenant, the method of settlement the costs of fit-out works between the parties remains irrelevant in this case. According to the Court, the construction company cannot be considered as a subcontractor and therefore this entity is obliged to settle VAT on this transaction.

5. Disposal of the shopping centre and VAT taxation – judgment of the Supreme Administrative Court of 20th April 2018, no. I FSK 1113/16

The Company sold the shopping centre building under the “datio in solutum” agreement. As a result of the contract all of the building equipment not belonging to the tenants, as well as all benefits and burdens related to the real estate have been transferred to the purchaser. As a result of the transaction, the seller of the real estate issued a VAT invoice with the VAT amount disclosed.

During the tax audit concerning VAT settlements, the authorities came to the conclusion that the subject of the “datio in solutum” agreement was an enterprise which is out of the scope of VAT taxation. Thus, in the opinion of the authorities, the buyer overstated the amount of deducted input tax, because pursuant to the VAT Act, input VAT shown in the invoices related to the non-taxable transactions do not constitute a basis for reducing the tax due.

The case was referred to the Supreme Administrative Court, which agreed with the position of tax authorities. According to the court, when the company acquired the property along with the equipment, as well as all the benefits and burdens, and then operated with the purchased assets in the same scope, the assets should be considered as an enterprise. In the opinion of the Court, for the purpose of determining whether the transferred  assets constitute an enterprise, it is crucial to establish if transferred property allow to run business activity independently.

6. Determining the tax deductible costs resulting from the sale of real estate acquired as a contribution in kind and qualified as a current asset – the judgment of the Supreme Administrative Court of 23rd January 2018, no. II FSK 3417/17

The case concerned the tax ruling, in which the applicant raised question about the method of determining the tax deductible costs of related to the sale of real estate acquired as a contribution in kind and qualified as the company’s current assets. According to the applicant, in the presented case the tax deductible costs should be considered as initial value adopted by the partnership in records of tangible assets and intangible fixed assets, less the sum of depreciation write-offs. Both tax authorities and Voivodship Administrative Court disagreed with the applicant’s position.

The case went to the Supreme Administrative Court, which considered the applicant’s position to be incorrect. The court noted that the Act on Personal Income Tax provides for two methods of determining the tax deductible costs in the event of the sale of real estate contributed to the company. In the case of real estate classified as fixed assets, the deductible is the initial value adopted in records of tangible assets less depreciation write-offs made by the taxpayer. On the other hand, in the case of other property, the tax deductible costs should be considered as the value of expenses incurred to acquire or to develop a property, not included in the tax-deductible costs in any form. At the same time, the Supreme Administrative Court underlined that the situation in which the taxpayer is not able to determine the value of the incurred costs should give rise to the same tax consequences as the situation in which the taxpayer did not incur any costs.

This post is also available in: pl - Newsletter Real Estate June 2018PL

Related posts