PL

The big can do more

Investment & finance
As the investment market surges ever onwards, consultancies are also thriving. However, the competition in this segment is fierce and so consolidations are taking place to enable them to face the challenges of the future. We interviewed Małgorzata Dankowska and Wojciech Sztuba, respectively a partner and the managing partner of TPA Poland, about the current market environment and the details of their latest merger

‘Eurobuild CEE’: The Polish real estate market has been in fine form. What does this look like from your point of view?

Wojciech Sztuba, managing partner, TPA Poland: We’ve had high excess liquidity for a long time, especially when it comes to the big banking and insurance groups who supply the largest amounts of funds invested in various types of assets, including real estate. There are more and more high class optimised products available for these funds in Poland, not only in Warsaw but also in other large cities. This is especially visible on the office market, which is being driven not only by internal demand but also by the relocation of international BPO/SSC centres to Poland.

Małgorzata Dankowska, partner responsible for the real estate team and Warsaw tax practice, TPA Poland: In H1 2019, the Polish real estate investment market received the most capital out of all the states in Central and Eastern Europe. According to the estimates of consultancies, the figure was approximately EUR 2.8 bln. A large proportion of this is coming from Asia and Western European investors, while capital from South Africa investors is also evident. In our daily consultancy work, we have also been seeing a growth in the proportion of new players from Central and Eastern Europe – particularly from the Czech Republic and Hungary.

The opinion has been gaining ground that we are at the top of the current business cycle. Have investors started to become more cautious?

MD: Despite the fact that we’re at the peak of the cycle, we’ve not been seeing any greater cautiousness among the investors we work with. Of course, there needs to be greater care in the context of the increasingly complex tax regulations and the greater obligations in terms of reporting, but the market operates according to well-devised standards. However, there has been a change in the investment policies of those players that have had more conservative strategies up to now. While they’ve been relaxing their policies, investment funds have also been opening up to new asset locations with a larger development component or those with bigger vacancy rates. One bad apple in this barrel is the continuing lack of a legal body for concentrating Polish capital and payment profits into dividends with the involvement of a professional managing entity.

Exactly. Is the Polish legal and tax system providing favourable conditions for investing in real estate? How are investors reacting to the changes that are being introduced?

WS: The confusion over the changes in the government’s approach to counting transactions as subject to VAT when they involve land with buildings, as well as to the tax on civil law transactions when an enterprise or an official part of it is involved, have both resulted in significant friction. Unjustified attempts to refuse the protection rights of parties that stem from previously accepted individual interpretations has led to growing concerns over the tax security of investments. Although such individual turbulence shouldn’t have an affect on the dynamics of the transaction market, its impact can’t be underestimated either. The quantifiable tax risk of investing is an important component of the investment competitiveness of any market and should not be escalated without good reason.

Which tax regulations have been the most recent to affect the real estate market?

WS: Such regulations include the mandatory disclosure rules introduced this year – the special and highly sanctioned procedures enforcing the notification of tax schemes by taxpayers or their advisors. Their meticulousness, the depth of interference and their severity mean that in Poland we have to report to the tax authorities activities that don’t even touch on the circumventions of the tax law that they are supposedly intended to deter. These systems have been adopted in line with European regulations, but the particular EU directive in question limits reporting obligations to situations that are in the sphere of prohibited practices. The Polish MDR model enforces the reporting of virtually anything, including activities that don’t involve the risk of tax evasion. The goal of the legislator is understandable: it’s a scare tactic to ensure all the various taxes are paid, which is a much simpler approach than undertaking arduous reforms to the tax authorities’ enforcement of the existing law. The impact may, however, be paralysing for transactional and investment activity in the long run. The same applies to the tax at source, which is collected when dividends or interest to foreign recipients are paid, which in itself is relatively transparent and has been known across the world for years. The provisions of international law, such as the conventions on the avoidance of double taxation, and of the European Community or our national law, exempt a significant proportion of recipients from this tax, including the majority shareholders. However, the Polish legislator has decided to demand payment of 20 or 19 pct of such a tax in advance when paid abroad. In the next stage, you will only be able to apply to the Polish tax authorities for a refund for overpayments resulting from the applicable law. As a result, we are making life difficult for investors when other countries are not doing such things, and there will be no increase in budget revenues due to this. It’s also worth remembering that this is not the end of the tightening of the tax regulations. Future changes to the penal and fiscal law have also been announced, which will have consequences for investors in the form of event loss of control over the company.

It seems that the Polish legislator is making sure that tax advisors will be busy. However, I understand that this is not the only reason for TPA Poland’s merger with another company?

WS: We have managed to reach a very good agreement with Moore Stephens Central Audit to merge with their team of 70 advisors. As a result, we’ve been operating under the TPA Poland brand since September this year. For us this means a significant strengthening in the field of services and expert advice, not only in the area of ​​consultancy for the real estate sector, but also for other sectors. Since September we have been building a team of almost 300 people with whom we will continue to develop and strengthen our already rather strong position on the Polish consultancy market.

Where did the decision to merge come from?

WS: There were several important aspects that we could see were similar in both companies. They both operate on two markets – consultancy and outsourcing services, including accounting and payroll administration. These are separate segments, characterised by differing dynamics and susceptibilities to technological changes. However, we can expect that the market will become more saturated and competitive in both cases. Consolidation is therefore a natural process. We also want to be an agent of change and consolidate the market in a way that provides us with the opportunity to be more agile and effective in response to the challenges of the future. It’s already becoming clear how things might turn out, especially in the area of ​​outsourcing services, which due to their process-based nature are subject to faster robotisation and automation than, say, transaction or legal consulting services. Due to the merger we will also be able to supply services that we have not previously provided, such as an investor service in French. Above all, however, we are strengthening our core services because our new colleagues are experienced auditors, accountants and tax advisors, and the similar organisational cultures of both companies enable us to integrate them efficiently and smoothly.

The two at the top of TPA

Małgorzata Dankowska a specialist in transaction and restructuring advisory. She has extensive experience in handling commercial real estate transactions related to acquisition, disposal and finance restructuring. Małgorzata has been a speaker at many tax conferences and workshops. In 2013 she was ranked second Best Polish Tax Advisor in M&A by Dziennik Gazeta Prawna. She has also been twice awarded the Women in Tax Leaders title by the International Tax Review. She is a certified tax advisor as well as a member of the IFA (International Fiscal Association) and the REIT Poland Association. She graduated from the University of Economics in Poznań, holds a postgraduate diploma in tax law from the Warsaw School of Economics, and has finished postgraduate studies in the field of bookkeeping.

Wojciech Sztuba has extensive experience in the field of tax and business advisory services, especially for construction and real estate companies as well as those in the energy sector. He specialises, among other fields, in tax structures specific to foreign investment funds, real estate acquisition and real estate taxation. He is a lecturer in a number of specialised training programmes, including those organised by the Instytut Doskonalenia Wiedzy o Rynku Energii [the Institute for Improvement of Energy Market Knowledge], PWEA PTPiREE, IHK, Euroforum IRIP, ELSA and Energia i Środowisko [Energy and Environment]. He is also a lecturer at the University of Economics in Poznań in the postgraduate taxation and treasury faculty. Wojciech graduated in business administration at the Adam Mickiewicz University in Poznań in 1997. In 1994/1995 he studied business administration at Otto-Friedrich- Universität in Bamberg, Germany. He has been a certified tax advisor since 1999. In December 2015 he became a doctor of juridical science, specialising in tax law.

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