Tax payers often have a problem when selling real estate. In principle, it is taxable, but the legislator has given under certain conditions the possibility to benefit from the exemption. In the Act of 11 March 2004 on tax on goods and services (VAT Act: Journal of Laws of 2011, item 1054 i.e. as amended) In Article 5 a list of activities subject to VAT is presented. It was pointed out, among other things, that the tax on goods and services is subject to the payment of the supply of goods and services.
Therefore, all activities involving the supply of goods, namely the sale of real estate, will be subject to taxation. The taxpayer selling the property will be obliged to tax it.
The taxable person within the meaning of the VAT Act is legal persons, non-legal entities and natural persons, carrying out their own economic activities irrespective of the purpose and outcome of the activity.
However, the legislature concluded Article 43(1)(10)(10a) VAT Act conditions under which a taxable person may benefit from the exemption at the time of sale of the property. In the recipe Article 43(1)(10) it is indicated that the supply of buildings, structures or parts thereof shall be exempt from tax, except where:
- • delivery is made within the framework of first settlements or before,
- • between first settlement and delivery of buildings, structures or parts thereof have been less than 2 years.
Definitions first settlements are indicated in the VAT Act. It means putting into service, in the performance of taxable activities, first buyer or user of buildings, structures or parts thereof, after their construction or improvement, if the expenditure incurred for the improvement, within the meaning of the Personal Income Tax Act of 26 July 1991 (the PIT Act, Journal of Laws of 1991, item 350, as amended) and the Corporate Income Tax Act (CIT Act, Journal of Laws of 1992, item 86 where improvements are indicated to be treated as reconstruction, expansion, reconstruction, adaptation or modernization, as in the Act of 29 September 1994 on accounting (Journal of Laws of 1994, item 591, as amended), However, they must be at least 30% the initial value of the property.
Regional Administrative Court in Krakow in judgment of 25 November 2010, reference no. I SA/Kr 1581/10 considered that first the settlement is put into service, in carrying out taxable activities, first the buyer or user of buildings, structures or parts thereof. first settlement need not be a supply of goods.
The essence first the settlement is put into service, which takes place in the performance of taxable activities. first the settlement can therefore be either a lease or a lease. This is devotion first the buyer or the user. first settlement will therefore only be first a tax measure on the buildings (parts) or structures concerned.
If, on the other hand, the taxpayer fails to comply with the conditions of Article 43(1)(10) VAT Act has the possibility to benefit from point 10a that Article. In this case, the legislator indicated that the supply of buildings, structures or parts thereof not covered by the exemption referred to in point 10, provided that:
- in respect of these facilities, the person making their delivery was not entitled to reduce the amount of tax due by the amount of input tax,
- the person making their supply did not bear expenditure for their improvement, for which he had the right to reduce the amount of tax due by the amount of input tax, and if he incurred such expenditure, they were lower than 30% initial values of these objects.
The most important condition here is "first settlement’ after construction or after improvement. It decides whether to benefit from the exemption from the supply of buildings, structures or parts thereof. An important element is also the question whether the taxable person was entitled to deduct the input tax from the supplier of the construction works.
In an individual interpretation, Director of the Tax Chamber in Poznań on 12 January 2016 (ILPP2/4512-1-776/15-4/MN) indicates that the tax exemption benefits from the supply of buildings, structures or parts thereof which are not made within the framework of first settlements or before and when between first settlement and the supply of buildings, structures or parts thereof has been longer than 2 years.
In this case, the exemption provided for in Article 43(1)(10) Act.
Only when the supply of buildings, structures or parts thereof fulfils negative conditions that prevent the benefit of tax exemption on the basis of Article 43(1)(10) Act (paragraph (a) or (b) of that provision) — it must be examined whether such supply may be subject to the tax exemption laid down in Article 43(1)(10a) Act.
For it is clear from this provision that the exemption applies to the supply of buildings, structures or parts thereof not covered by the exemption referred to in point 10.
Therefore, when selling the property in question, the taxable person will be subject to taxation if the conditions of the abovementioned provisions are met, but he will not pay the tax due because of the exemption.
Finally, it is worth pointing out that taxable persons who only carry out exempt activities may benefit from the exemption indicated in Article 43(1)(2) Act about VAT. The tax exemption provided for in that provision applies to all goods, both real estate and movable property, when acquired importation or manufacture) which the taxable person did not have the right to deduct VAT and used, regardless of the period of their use by the taxable person exclusively for VAT exempt activities.
Thus, even if the taxable person sells the property in the course of his business, he will not in every case be liable to tax it with a tax on goods and services.