Real estate companies in the face of new responsibilities – still without determining how they are implemented

The definition of a real estate company was established relatively recently, in 2019 to the Tax Act[1] [2] income came into being the definition of a real estate company concluded accordingly under Article 5a(49) the PIT Act and Article 4a(35) CIT Act.

In large simplification, real estate companies become companies in which the balance sheet value of the property exceeds 10,000,000 PLN and simultaneously exceeds 50% the carrying amount of the assets.

According to point (e) the relative content of the provisions, the statutory definition distinguishes between situations where we are dealing with a start-up entity and an entity continuing its business activity.

Whenever a real estate company is referred to in the Act, this means an entity other than a natural person who is required to draw up a balance sheet on the basis of accounting rules in which:

„(a) on the first day of the tax year and, where a real estate company is not a taxpayer of income tax, on first the date of the financial year, at least 50% the market value of the assets, directly or indirectly, represented the market value of the real estate located in the territory of the Republic of Poland or the rights to such properties and the market value of those properties exceeded 10,000,000 PLN or the equivalent of that amount determined at the average foreign currency rate announced by the National Bank of Poland on the last working day preceding first the date of the tax year for start-ups,

(b) on the last day of the year preceding the tax year and, where a real estate company is not a taxable person, on the last day of the year preceding the financial year, at least 50% the carrying amount of assets, directly or indirectly, represented the carrying amount of real estate located in the territory of the Republic of Poland or the rights to such real estate and the carrying amount of such property exceeded 10,000,000 PLN or the equivalent of that amount determined by the average foreign currency rate published by the National Bank of Poland on the last working day preceding the last day of the tax year preceding the tax year or the financial year, respectively, the tax year or financial year, and in the case where the real estate company is not a income tax taxable person, the revenue recorded in net financial result, in connection with the lease, sub-leasing, leasing and other contracts of a similar nature or with the transfer of ownership, the property or property rights in question under Article 3(3)(4), and for shares in other real estate companies, they were at least 60% in the case of entities other than those specified in point (a).”

At the same time as the definition of a real estate company arose, the legislator introduced a number of reporting obligations. For entities whose year coincides with the calendar year first obligations must be carried out by the end of March 2022. What are they?

According to Article 27(1e) The CIT Act of the company and its shareholders are obliged to transfer ownership structures to the Head of the National Tax Administration. This obligation must be fulfilled by real estate companies and their partners who have:

• shares or shares giving at least 5% voting rights,
• all rights and obligations giving at least 5% rights to participate in profit,
• at least 5% the total number of participation titles or similar rights.

On the other hand, the information obligation concerns the communication of information on entities having, directly or indirectly, shares, all rights and obligations, titles of participation or rights of a similar nature, including the number of rights held by each of them. Where the above information is provided by the partners, they must also indicate the number of shares held by them. In both cases, the information should be sent on the last day of the tax year of the company.

This information shall be transmitted by electronic means. However, by the end of the deadline for sending information on the ownership structure there is a month left. At present, there is no specific guidelines for the implementation of the statutory obligation.

The scope or form of the information transmitted is unclear, as so far there is no official form. The provisions do not specify in any way the scope of the data which must be transmitted to the authority which, if deemed incomplete, calls for it to supplement it to the extent it requests.

Additional questions arise when reporting indirect links. A particularly complicated situation may arise in the case of a large entity that has an extensive capital structure, as identifying all entities as indirect partners can be very time-consuming and complex. The only hint of the legislature is to establish links on the basis of rules contained under Article 11a(3) the CIT Act, i.e. on the basis of regulations on transfer pricing documentation.

Despite many ambiguities, the lack of clarity by the legislator of the scope of the requested data, the lack of a specific method of transmission, it should be noted that it is for the taxpayer to be liable for failure to provide or transfer incomplete data. The regulation on the introduction of a given structure is still at the level of the arrangements. It remains to be hoped that the legislator will be able to announce it within a legal period requiring real estate companies to submit the relevant information.

Author: Darya Bannaya

Younger tax consultant. Graduate of Law at the Faculty of Law and Administration of the University of Warsaw, graduate of Global Business, Finance and Management in Warsaw School of Economics. Winner of the Ministry of Finance competition “Tax of Leaders” 7. edition. Conducting trainings and conferences for foreigners in tax aspects of conducting and establishing business in Poland.

He specializes in tax law, advising clients on current matters relating primarily to income taxes.

Author and co-author of a tax law publication.