FINN may soon be an acronym that will permanently be found in dictionarys of investors seeking new opportunities to locate their funds.
The Polish legislature, following solutions present in Western markets, proposes to introduce a solution to the Polish legal system, which is intended to increase the participation of institutional investors in the domestic rental market of residential property.
Investment funds in Real Estate Rental, or FINN, according to the draft law (print no. 2855), they will receive a specific tax status which is designed to encourage an increase in the market share in this segment, and will also give the possibility for individual investors to place funds without the need to acquire real estate for rent.
FINN status
According to Article 3 The proposed law is a joint stock company whose main business is the rental of residential properties located in the territory of the Republic of Poland, including through subsidiaries, and which meets the following conditions:
- • has its seat and management in the territory of the Republic of Poland;
- • its shares were admitted to trading on the official listing market within the meaning of Article 16(2) Act of 29 July 2005 the trading of financial instruments;
- • has been created for an indefinite period;
- • its share capital shall be at least 50,000,000 PLN;
- • all its shares are bearer;
- • does not issue privileged shares;
- • its statutes shall lay down the principles of the economic strategy of that company and of the subsidiaries, in particular the type of immovable property to which the lease will be subject and the criteria for the selection of such properties;
- • is entered in the register of companies investing in real estate rented by the Financial Supervision Commission.
The authors of the bill in its explanatory memorandum indicate that "investment in residential real estate companies is attractive not only to institutional investors but also to private investors, due to an attractive risk profile based on high-quality properties and regularly paid dividends".
The requirement to supervise such a company by KNF and a number of information requirements imposed on the company, as well as the amount of share capital, allow companies using the terms FINN to assume to be trustworthy entities to which individual investors can entrust their savings.
At the same time, it is worth noting that FINN does not aim to dispel companies operating in the real estate rental industry, which, also after the entry into force of the proposed law, will be able to operate on the current basis.
Tax benefits for FINN
What is the benefit of investing in real estate rental through such an entity? The answer can be found by analysing the method of taxation of FINN.
The FINN tax rules are to consist of:
- •
- the postponement of the tax obligation for FINN's income from its activities until their equivalent is spent on the payment of dividends to investors;
- •
- introduction of a tax rate of 8.5% the income obtained by FINN (provided that depreciation from the initial value of the rented property would not constitute the cost of obtaining income)
At the same time, the legislator proposes exemption from tax on income tax on capital investment income in FINN from investors.
Author:
Mikołaj Stanisławski
From 2017 Associated with Russell Bedford Poland. In 2007 graduated from the Faculty of Law and Administration of the University of Warsaw. In years 2008-2011 he made an attorney's application. From 2011 entered on the list of lawyers at the District Bar Council in Warsaw. In 2016 He graduated from the Postgraduate Tax Studies and Tax Law of the University of Warsaw. Specializes in tax and tax matters.