New tax to be levied on commercial real estate from 1 January 2018 | SSW Tax Alert

As of 1 January 2018, a new tax will be levied on commercial real estate, as stipulated in the law passed on 27 October 2017, amending the laws on income tax payable by legal entities (CIT) and income tax payable by natural persons (PIT).

The new tax is to be paid by owners of commercial real estate defined as a commerce and service building. The category includes the following venues:

• shopping centre;
• department store;
• self-contained shop and boutique;
•  other commerce and service buildings.

Office buildings of a value exceeding PLN 10 million are also included in this category.

The new regulation will also apply to taxpayers not being owners (or co-owners) of the real estate included in the above asset category, but using such facilities and deducting depreciation allowances according to the provisions of tax laws.

The new tax will amount to 0.035 per cent of the taxation base per month,  the taxation base being the gross income equal to the initial fixed asset value (as calculated for the first day of each month on the basis of the entries in fixed asset accounts), less PLN 10 million. Special rules of calculating the initial value of fixed assets co-owned by affiliates are also included in the new regulation.

The relevant taxpayers will be entitled to deduct the new tax from the income tax calculated in accordance with the general rules of taxation. It has been stipulated that the new tax will be deducted from income tax prepayments. In the annual tax statement for the previous fiscal year, taxpayers will also be entitled to deduct the tax actually paid but not deducted during the year.

The new tax will not be levied on commercial real estate used solely or mainly for the purposes of a taxpayer nor on assets of this kind that are no longer subject to depreciation.

In effect, the changes result in a sort of minimum tax to be paid by owners of commercial real estate. In other words, the new tax will be levied on entities which, because of losses incurred in previous years, high depreciation and financing costs, do not pay income tax related to their current business activity.

Should you be interested in the impact of the new tax regulation amendments on your business activity, do not hesitate to contact us.

Patrycja Goździowska – Partner, Tax Advisor

Tomasz Wickel – Partner, Attorney at Law