General interpretation of the Minister of Finance in the area of housing rental using an intermediary and VAT issues

On 8 October 2021 The Minister of Finance issued a general interpretation by reference no. PT1.8101.1.2021 as regards the VAT exemption for renting or leasing residential property or part of immovable property, on own account, exclusively for residential purposes using an intermediary.

Over the years, there have been interpretation doubts as to the possibility of using the above-mentioned exemption in the case of renting premises, indeed, for residential purposes, but not directly to natural persons, but to intermediaries such as real estate agencies or other economic operators. This is particularly true of the nature of the transaction when the property owner rents it to an entrepreneur (e.g. a company) for the accommodation of his employees, board members, seconded persons, etc.

There are ambiguous provisions on this issue under Article 43(1)(36) VAT Act. The positions contained in individual interpretations in this topic have changed over the years. For example, in the tax ruling dated 20 April 2018 o reference no.

0112-KDIL4.4012.114.2018.1.JKU The Director of National Tax Information (hereinafter: DKIS, Director of KIS or Organ) interpreted this issue favourably to taxable persons that: “Because the purpose of the intended service is to rent a dwelling to the Company, which makes the residential premises available exclusively for the purposes of housing for workers, the above conditions for the application of the tax exemption provided for are met.

Under Article 43(1)(36) Act. This fact does not alter the fact that the lease is made to the Company conducting business activity on its own account. It is important to know the purpose for which the dwelling is rented by the Applicant – it is rented tenant for residential purposes (as determined by the contract concluded).

Therefore, the subject of the contract will be the rental of residential premises exclusively for residential purposes and VAT exemption will be applied on the basis of Article 43(1)(36) Act.’[1].

However, the jurisprudence of the administrative courts saw a difference between an economic service compared to an intermediary and a residential lease provided to the end-user. The general interpretation cites an excerpt from the NSA ruling dated 8 May 2018, reference no.

I FSK 1182/16: „It is clear from the provisions set out above that the rental service is exempt for housing purposes only. This means that from the point of view of applying this exemption, the use of the property by tenant (recipient), and therefore this tenant in the rented accommodation should pursue its own housing objectives.

Only in such a case will it be legitimate to state that landlord (the recipient) rented the property “for residential purposes only”.

(...) In the case-law of the Supreme Administrative Court, the view is expressed that the exemption from the rental of residential premises is a special exemption, aimed at protection, in economic terms, tenants housing actually meeting housing needs through the same rent.

This preference, on the other hand, is not covered by rental services of residential premises whose direct purpose is not to meet housing needs tenant, but its achievement of economic objectives, including economic objectives (judgments: from 3 August 2013 reference no. I FSK 1012/12, to 7 April 2016 reference no.

I FSK 1963/14 and 4 October 2017 reference no. I FSK 501/16; available on http://orzeczenia.nsa.gov.pl The decision-making body in the present case shares this view’. Consequently, the position of tax authorities has changed to negative – see e.g.

the tax interpretation of the Director of KIS dated 7 March 2019, reference no.0115-KDIT1-1.4012.61.2019.1.EA.

At the same time, yet In 2019 once again, there have been favourable positions for taxpayers - for example, the tax interpretation of the Director of KIS dated 15 July 2019, reference no. 0115-KDIT1-1.4012.327.2019.1.IK is dated 1 August 2019, reference no. 0114-KDIP1-1.4012.314.2019.2.KOM.

This remained the case until the general interpretation – see e.g. tax interpretations of the Director of KIS dated 29 December 2020, reference no. 0114-KDIP1-1.4012.757.2020.1.MKA and dated 26 August 2021, reference no. 0113-KDIPT1-3.4012.460.2021.2.KS[2].

two separate services or complex service?

By issuing a general interpretation, the Minister of Finance decided to clarify the doubts in favour of the established jurisprudence of the administrative courts, which constituted a pro-fiscal interpretation, thus detrimental to taxpayers.

The positive aspect is that taxpayers now know how the fiscal system is ultimately to treat the above-mentioned provision. However, the case can be viewed as a twofold — as a separation two services – first in relation to the intermediary and second either as a resident or as a comprehensive service.

In the judgment dated 27 October 2005, reference no.

C-41/04 in the case of Levob Verzekeringen BV TSUE, two or more than two the activities (type: supply of goods and/or services) carried out by the taxable person to the buyer are so closely related that they objectively constitute economic one all of which would be artificial in nature, all of which constitute a uniform supply for the purposes of the application of VAT (i.e.

either the supply of a particular commodity or the provision of a particular service), even if this is the case at the time of payment two or many separate prices.

It follows from this that, despite the rules of the VAT Directive, the principle of the differentity of the provision of services (supply), the VAT rules, and in particular its functionality, require the combined treatment of services two (or more) services/supply to the same recipient.

Provided that both (or more) activities remain in a close economic relationship in that their independent treatment would be artificial in nature, as well as where one of the activities carried out would constitute an ancillary service to second, enabling better use.

In other words, the need to take two or a number of services (supply) as a whole will determine the absence of separateness and independence of the individual activities carried out within the framework one transactions.

Related short-term rental situation

The situation is also complicated by the fact that the Minister of Finance has not decided to regulate a similar issue. Well, if the company rents the property first to the entity third, which subsequently provides short-term rental services to the final customer (consumer), a similar problem arises in relation to Article 43(20) VAT Act. In this regard, there was no doubt that this transaction should be subject to VAT – it was problematic whether to apply a basic or preferential VAT rate[3].

In this respect, also to a breakthrough Directive 2019/2020 there was a favourable interpretation line for taxpayers, which changed. The negative position in this matter remains to this day. In an individual interpretation dated 17 March 2017, reference no.

3063-ILPP1-1.4512.19.2017.3.MJ The Director of National Tax Information concluded that: ‘(...) it must be stated that the activity of renting the premises by the Applicant to the benefit of tenant for the purposes pursued by tenant business activity in hotel services, classified in the PKWiU grouping 55, i.e.

accommodation services - is taxed at a rate of tax on goods and services of 8%.”. So, the director of KIS treated two services as one comprehensive delivery.

In the tax interpretation dated 1 February 2018, reference no. 0115-KDIT1-1.4012.849.2017.1.AJ The Director of the CIS also spoke in favour of the taxpayer. Moreover, he used another argument, for in this case he cited Article 8(2a) The VAT Act, thus referring to the refakturation.

This provision states that: “Where a taxable person, acting in his own name but for the benefit of a person third, take part in the provision of services, it shall be presumed that the taxable person himself has received and delivered these services.’

In his argument, the Authority explained that: ‘In the light of the description presented, it must be stated that the regulation resulting from the present case will apply. Article 8(2a) Goods and Services Tax Act. Activities performed by the Mediator on the basis of a cooperation agreement for short-term accommodation lead to the provision of the main service, without altering the main activity of short-term rental.

The description of the case shows that the role of the intermediary - the Company to which the Applicant entrusted his apartments is to replace him in activities related to short-term rental.

The presence of an intermediary has been dictated by organisational considerations and its role is limited, in effect, to replacing the property owner in short-term rental activities. An intermediary shall perform contractually on the applicant's account, acting each time and for his behalf.

Therefore, it will be the Applicant who will acquire the benefits of the business of renting premises for short-term accommodation.

The fact that the Applicant itself does not directly participate in dealings with customers using short-term accommodation and does so through an intermediary does not change the scope of the service provided, which still remains a short-term rental service.’

In this context, the negative position in the tax interpretation of the Director of KIS should also be cited dated 29 June 2020 reference no.

0114-KDIP1-1.4012.191.2020.2.EW: „The applicant’s rental service to the operator will not be allowed to benefit from the preferential rate 8% indicated In Annex 3 item 163 to the Act, as described in the application, the Applicant will rent the property to the Operator, who will then rent these apartments for his own account tenants for short-term accommodation.

As a remuneration for the rental service of apartments, the applicant shall receive rent agreed on by the Operator for the amount corresponding to 70% the net amount of the sub-rent due to the Operator by persons third. Rent will be settled on the basis of monthly calendar settlement periods.

Reservations will be settled according to the settlement period in which they end. The fact that the operator is using the premises for short-term accommodation does not mean that the applicant also provides such services.’

In conclusion, it can be concluded that the VAT treatment of residential (or similarly short-term) services using an intermediary is ambiguous. It can be understood as a separate service of a different nature (economic vs. housing) or as one comprehensive service with a primary focus on the final customer. It is not difficult to imagine a situation where the company engages an intermediary in housing (or short term) as it is in place and can therefore ensure better control of the premises.

The Minister of Finance, having held a strong argument in the form of a settled jurisprudence line of administrative courts, decided to adopt a pro fiscal position. A positive aspect, on the other hand, is in itself the issue of a general interpretation, which effectively increases the certainty of the application of the law.

Application will have a protective value on the ground Tax Ordinance – in particular as regards the non-injury of the taxpayer Article 14k-14m OP). However, the question of the VAT rate in the area of short-term rental with the operator still raises doubts. third.

It remains to be hoped that this aspect will also be resolved in the next general interpretation of the Minister of Finance.

About the author:

Mateusz Krawczyński

Junior tax consultant At Russell Bedford Poland. Graduated from bachelor's degree in Logistics and Master's degree in Finance and Accounting. He is currently studying law at the Łazarski University. Previous professional experience in tax matters In one of Big Four companies. He specializes in tax on goods and services, in particular with regard to VAT settlements in local government units.