Minimum tax comes into force

Andrzej Zając, senior associate and solicitor for real estate, CMS

We need to wait and see what the full impact of new regulations on the real estate market in Poland will be but we must already take into account that some real estate owners might seek to pass on the costs of the so-called minimal tax to their tenants, which will raise a lot of legal issues. For new leases, this cost, depending on the structure of the leases, might be immediately included in the rents or the operating costs. However for contracts that were signed before the introduction of the law, landlords will be able to pass on the costs if such a provision existed in the original contract (under operating costs). One have to bear in mind that additional taxes on property ownership have been expected for a number of years and from our practice we can say that the appropriate provisions have been added to leases (and depending on the lease the charges are either included or excluded from a list of operating costs). What is most frequently done is that all kinds of public and legal charges related to property ownership are included in the operating costs while income taxes are left out. The new minimal tax is defined by the act as an income tax but it nonetheless works more like a legal charge on property ownership rather than on earnings. Because of this, in cases where lease contracts do not settle the question of whether the costs of the minimal tax can be passed on, disputes may arise between landlords and tenants.

Piotr Nowicki, tax/corporate senior associate, CMS

Starting from January this year the new commercial real estate tax (both corporate and personal) will be levied on the owners of retail and service properties in Poland with a minimum value of at least PLN 10 mln. Importantly, the tax is not levied on commercial properties that are used exclusively or mostly by the taxpayer himself or which are not subject to tax depreciation write-offs (due to discontinuation of business). Otherwise, for owners of commercial properties the minimal tax comes to 0.035 pct of the tax base for each month, which is the revenue corresponding to the value of the fixed asset minus PLN 10 mln. Being calculated in this way, the minimal tax will be deductable from both personal and corporate income tax. The minimal tax will also be payable when a property has vacancies with two exceptions, which are (i) when the size of the vacant area in the property makes it possible to consider the property to be used mostly or exclusively for the taxpayers own use or (ii) when asset are not subject to tax depreciation (as mentioned above) - in such cases the property will not be covered by the tax.