General interpretation of information obligations of real estate companies

28 February 2023, due to doubts about the provisions of the Income Tax Act, the general interpretation of the Minister of Finance concerning information obligations for real estate companies and taxpayers holding shares in these companies was issued.

Definition of real estate companies includes Article 4a(35) Corporate Income Tax Act[1] (by analogy Article 5a(49) Personal Income Tax Act[2]). A real estate company is an entity other than a natural person 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 the first day of the tax year - in the case of 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 either 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, and in the year preceding the tax year, or the financial year, or in the case where the real estate company is not a income tax taxable person, the net revenue recorded 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 and shares in other real estate companies, at least constituted 60% in the case of entities other than those specified in point (a).

The general interpretation concerns the information obligations of real estate companies and taxpayers who hold shares in the companies concerned. In turn, it considers this obligation Article 27(1e) Corporate Income Tax Act and by analogy Article 45(3f) Personal Income Tax Act.

Under these provisions, real estate companies and taxable persons holding, directly or indirectly, interests in a real estate company giving at least 5% voting rights in the company or in general rights and obligations giving at least 5% the right to participate in the profit of a company not a legal person, or at least 5% the total number of participation titles or rights of a similar nature shall be transferred to the Head of the National Tax Administration by the end of time.

third one month after the end of the tax year of the real estate company, and if the real estate company is not a taxpayer of income tax - to the end third one month after the end of the financial year of the real estate company, information:

of entities having, directly or indirectly, shares in that real estate company, all rights and obligations, participation titles or rights of a similar nature, together with the number of such rights held by each of them - in the case of information provided by real estate companies,

of the number of shares held, directly or indirectly, in that real estate company, of all rights and obligations, participation titles or rights of a similar nature, in the case of information provided by shareholders of real estate companies

• according to the last day of the tax year of the real estate company, and in the case where the real estate company is not a taxpayer of income tax - on the last day of its financial year.

In view of the above, doubts arose regarding the group of entities obliged to submit the above information to the Head of the KAS. As noted in the general interpretation, doubts concern whether the mere fact of holding shares or other rights in a real estate company is sufficient for the existence of an information obligation, or whether it is necessary to have a tax obligation in Poland for any title in the tax year to which the information relates.

As explained in the general interpretation, the provisions Article 27(1e) corporate income tax laws and Article 45(3f) Personal income tax laws were introduced into the relevant laws together with other solutions aimed at facilitating the investigation of tax receivables in relation to income from the sale of shares in real estate companies. The purpose of these provisions is to obtain information by the tax administration about entities that may be liable to pay tax in Poland in the event of sale of shares in a real estate company.

The Minister of Finance, interpreting the above provisions by means of a linguistic interpretation supported by an expediency interpretation, indicated that:

1) the information obligations imposed are:

a real estate company and

taxable persons holding, directly or indirectly, shares in a real estate company giving at least 5% voting rights in the company or in general rights and obligations giving at least 5% the right to participate in the profit of a company not a legal person, or at least 5% the total number of participation titles or rights of a similar nature (hereinafter referred to as 'taxable persons holding rights to a real estate company');

2) a real estate company shall report information on:

entities holding, directly or indirectly, shares in that real estate company, all rights and obligations, participation titles or rights of a similar nature, giving at least 5% voting rights in the company or in general rights and obligations giving at least 5% the right to participate in the profit of a company not a legal person, or at least 5% the total number of participation titles or similar rights; and

the number of rights held by each such entity;

1. taxable persons having rights to a real estate company shall be obliged to submit information on the number of persons owned, directly or indirectly in that company, shares/shares, all rights and obligations, participation titles or rights of a similar nature.

This information obligation applies to both Polish tax residents and non-Polish tax residents, i.e. entities not established in Poland.

The Minister of Finance also explained that "a taxpayer having (directly or indirectly) rights to a real estate company" should be understood as:

• the shareholder of the real estate company, which is the entity mentioned under Article 1 Corporate Income Tax Act[3],
• the entity mentioned under Article 1 Corporate Income Tax Act, which holds rights to a real estate company indirectly - where such ownership of rights is exercised through a shareholder or subsequent entities, i.e. so-called transparent entities tax,
• Yeah. a member of a real estate company who is a natural person or an undertaking in succession,
• and a natural person or an undertaking in succession who holds rights to a real estate company indirectly - where such ownership is exercised through a shareholder or subsequent entities, i.e. so-called transparent entities tax.

According to Article 27(1g) Corporate Income Tax Act and, respectively, Article 45(3g) Individual Income Tax Act, for the calculation of the indirect share, the rules laid down apply under Article 11a(3) Corporate Income Tax Act[4], and in the case of natural persons - Article 23m(3) Personal Income Tax Act.

In addition, the Minister of Finance indicated, in the context of the minimum threshold of the rights held (shares, shares, participation titles or other rights) that 5%, that in order to calculate it, the rights held in the real estate company must be summed up indirectly with those held directly.

According to the position presented, the information obligation, both for real estate companies and taxpayers with rights to the real estate company, is carried out as at the last day of the tax year of the real estate company, and where the real estate company is not a taxpayer of income tax - on the last day of its financial year.

In the general interpretation, the Minister of Finance also indicated that the information obligation imposed on taxable persons with real estate rights does not apply to taxable persons exempt from corporation tax in question under Article 6 Act.

Finally, the Minister of Finance explained that in the case of tax capital groups the information obligations provided for under Article 27(1e) Corporate income tax laws apply not to the group itself but to companies which form part of such a group.

Information obligations related to real estate companies are not easy to fulfil. Let us hope that the general interpretation of the Minister of Finance will be helpful in this respect.

The Act regulates income tax on corporate income and capital companies in the organisation.

The provisions of the Act shall also apply to organisational units not having legal personality, except for companies in succession and companies not having legal personality, subject to section 1 and 3.

The provisions of the Act shall also apply to:

1. limited-liability companies and limited-activity companies established or managed in the territory of the Republic of Poland;

1a) public companies established in the territory of the Republic of Poland, if the shareholders of the public company are not exclusively natural persons and the public company does not submit:

(a) prior to the beginning of the financial year, information on corporate tax taxable persons and individuals tax taxable persons having, directly or through non-taxable persons, the right to participate in the profit of the company concerned, under Article 5(1) or referred to under Article 8(1) Act dated 26 July 1991 on personal income tax (Journal of Laws of 2021, item 1128, as amended), or

(b) update the information referred to in point (a), time 14 days from the date of the changes in the composition of taxable persons, or,

(c) the information referred to in point (a), time 14 days from the date of registration of the public company - in the case of the newly created public company and the public company resulting from the transformation of another company

• to the head of the tax office responsible for the registered office of the public company and to the head of the tax office responsible for each taxable person making income from such a company;

1. companies not having legal personality or management in another State, where, in accordance with the tax laws of that other State, they are treated as legal persons and are subject to taxation in that State on all their income, irrespective of where they are achieved.

[4] Owning indirectly the share or right in question Under section 2 point 1, means a situation in which one the entity has In the second the entity's participation or right through another entity or more entities, with the amount of indirect ownership or rights corresponding to:

• 1) the size of the share or the right connecting any two entities of all the entities to be included in the determination of indirect participation or rights where all the sizes of the shares or rights connecting those entities are equal;
• 2) the lowest size of the participation or the right of merging entities between which the amount of indirect participation or rights is determined, where the size of the shares or rights connecting those entities is different;
• 3) the total amount of indirect holdings of shares or rights - where the entities between which the amount of indirect holdings of shares or rights is determined combine more than one the indirect participation or right.