The rules on the settlement of property sales tax by individuals are a subject of constant interest. Despite the lack of significant changes in the legislation itself on this subject, the practice of applying the rules is constantly evolving.
A particularly sensitive question remains how the income obtained from the sale of our house or apartment will be taxed and under what circumstances the exemption of the funds obtained from the sale will be used to safeguard our own housing needs. Does the occasional lease of property invalidate the right to benefit from relief?
The state of uncertainty resulting from imprecise rules makes taxpayers eager to seek interpretations, which results in only eight months – from the beginning 2018 by July – above 1000 individual interpretations asking questions about the principles of taxation and the possibility to benefit from the relief. The analysis of this extensive interpretative material shows that the main distinguishing factor to which the tax authorities point is the question of whether the property to which the final funds are allocated serves only residential rather than commercial purposes.
The achievement of own housing objectives should not be taken too narrowly
one of the frequently raised issues is whether the use of funds obtained from the sale of the apartment for the purchase of several apartments allows to retain the right to benefit from the relief.
In response to such questions, there were various divergent decisions by tax authorities, in which despite the fulfilment of the other criteria (i.e., the demonstration of the actual use of the property for own housing purposes), but e.g.
at the same time in two different localities, due to the professional activity of part of the year in a place other than the place of residence. In recent times, we have observed a trend that, in such situations, interpretations have not been beneficial to taxpayers, i.e.
despite the lack of commercial use of real estate, tax authorities have not allowed the benefit to be taken against two or several purchased apartments.
In this context, the Supreme Administrative Court judgment may be of significant importance from 4 July 2018, reference no. II FSK 1935/16, in which the court explained that the achievement of its own housing objectives should not be taken too narrowly. Having several premises does not prevent the use of relief.
The main criterion in this respect is the real implementation of housing needs. The conclusion is that the taxable person has the right to benefit from a relief for the purchase of the property, but only one in which he will live.
There is no reason to take advantage of the relief that the taxpayer acquires several residential premises, as well as that it currently has another residential establishment in which it resides.
Such a court ruling should reassure taxpayers who intend to benefit from the relief in order to safeguard their housing needs for the future, e.g. for the period after the end of their professional activity or for a significant reduction.
For example, if we sold our current apartment in Katowice and allocated the proceeds obtained from the sale partly to purchase a new apartment in Silesia, and partly to buy a cottage in Wisla, which we would like to use in a few years, when we no longer have to spend as much time as we currently do on work, there should be no doubt about it.
The judgment cited above causes that, in fact, in such a situation, we should not have any reason to fear that our peace will be disturbed when we consider that before we have a happy period of meeting our own housing needs in our cottage in Wisla, we will rent it from time to time to someone we know (or to a friend), which will allow us to cover some of the costs of maintaining the property.
After examining the settlements, we are still looking at this possibility quite optimistically, because unless the lease is of a commercial nature, such use of the property will not result in the loss of the right to exemption.
Similar to the fact here considered was the subject of an interpretation of the CIS issued 5 July 2018, The number... 0112-KDIL3-2.4011.216.2018.1.MK. The applicant already has an apartment where she and her husband live. In her inheritance after her father died, she received four dwellings that she then sold.
From the money obtained from the sale, she purchased the house and two other dwellings. The pension applicant plans to “residence permanently in these properties and pursue her own housing objectives.
During the transitional period until the actual retirement, the Applicant considers the possibility of non-commercial renting of these properties [...]’. The Interpretative Body considered that there were no legal obstacles to the applicant being able to benefit from the tax exemption.
This decision is also a confirmation of the ever-expanding interpretative line of use of relief from Article 21(1)(131), where the border point is commercial, commercial use of the purchased property.