With entry into force Polish Deal from 1 January 2022 a new, interesting relief was implemented in the PIT Act related to expenses incurred to protect monuments. It has been given the name "Palace+", incorrectly, as it applies to a wide range of historical objects as well as to a wide range of taxpayers. It would seem that a more appropriate name would be "stonestone+", as historic tenement houses will benefit in particular, and there are far more of them than palaces.
According to the relief introduced, both non-economic taxpayers and their business operators, who account for the general principles and in a linear manner, will be able to deduct the following expenditure from the tax base:
- 1) paid in the tax year for contributions to the housing community's renovation fund or housing cooperative created for immovable property entered in the register of monuments or listed in the register of monuments;
- 2) incurred in the tax year for conservation, restoration or construction works in a immovable monument entered in the register of monuments or in the records of monuments;
- 3) for the payment of the acquisition of a immovable property entered in the register of monuments or participation in such a monument, provided that the taxable person for the acquired property has incurred the expenditure in question Under point 2.
Interestingly, tax payers accounting for a lump sum on recorded revenue will also benefit from this relief. On the other hand, under Article 26hb The PIT Act, in which this regulation is based, has no reference to the flat-rate income tax Act.
Therefore, it is necessary to look directly at the said law, namely Article 11, in which there is an appeal stating that a taxable person paying a lump sum from recorded revenue may deduct from the revenue expenditure specified, inter alia, precisely under Article 26hb(1) PIT Act.
In turn, this concession will not apply to income from cash capital such as dividends or interest. It will also not be used by CIT taxpayers.
Several additional conditions
This allowance applies only to real estate. It is also subject to several basic conditions:
deduction in question Under points 1 and 2, the taxable person is entitled if, at the time of the expenditure, he is the owner or co-owner of the monument. By contrast, in relation to point 3, the taxable person must be the owner/shareholder of the monument for the moment of deduction;
in point 2, the taxable person must hold a written permit from the provincial conservator of monuments - in the case of a monument entered in the register of monuments or a conservation recommendation - in the case of a monument located in the provincial or municipal register of monuments;
deduction from points 1 and 2 shall not exceed altitude 50% documented expenditure;
deduction from point 3 may not exceed the amount 500 PLN x quantity m2 the usable area of the immovable property - but up to the amount 500,000 PLN for all expenditure incurred in this respect. The limit does not apply here. 50%. It also follows that the upper limit of the usable area to which the relief applies 1,000 m2;
In addition, the amount of deduction that exceeds the taxpayer’s annual income will be deductible in subsequent years, but no longer than by six years from the end of the tax year in which the deduction was made.
It is worth noting that the legislator has decided that a taxpayer in the event of the acquisition of a historic property (v. point 3) will have to bear expenses for conservation, restoration or construction works in this monument. However, the legislator did not determine the amount of these expenses. Consequently, one can imagine a situation in which the buyer will only spend 1 PLN for that purpose. Indeed, actual rescue work may be called into question, or at least it may be significantly distributed over time.
Moreover, no restriction was introduced on the rapid disposal of such property. As a result, it is possible to acquire historic property, benefit from relief and then immediately sell it. There is no contraindications to such action, only to bear in mind the minimum expenditure on works in such a facility (as indicated in the above paragraph).
Exemptions for deductions
It is also necessary to bear in mind the reservations provided for resulting in deduction exemptions. Expenditure which:
have been deducted from revenue under the Flat Income Tax Act;
have been taken into account by the taxable person for the use of tax credits within the meaning of Tax Ordinance. This includes exemptions, deductions, reductions or reductions which are subject to a reduction in the tax base or the amount of tax in income tax, as legally defined. Under Article 3(6) Tax Ordinance;
go beyond the scope of the works and works specified in the permit of the provincial conservator of monuments or conservation recommendations;
have been financed, financed or reimbursed to the taxpayer in any form.
The legislator also clarified how to understand the concepts used in these regulations. And so whenever it comes to:
- useful surface — this means the surface in question under Article 16(4) and 5 inheritance and donation tax laws;
- conservation works – this means conservation works as defined Article 3(6) Acts on the protection of monuments and the care of monuments;
- Restoration works – this means restoration works in the sense of Article 3(7) Acts on the protection of monuments and the care of monuments;
- construction works – this means works within the meaning of Article 3(8) Acts on the protection of monuments and the care of monuments;
- a immovable monument – this means a immovable monument in question under Article 6(1)(1) point (c)–e Act on the protection of monuments and the care of monuments.
A wide range of taxpayers can benefit from the relief to protect monuments. However, it should be stressed that, of course, those with high earnings who have considerable investment resources will benefit most. They will be able to significantly reduce their income tax. In the media space, there was even information that the described relief was prepared strictly under the head of Orlen Daniel Obietek. Orlen's press secretary categorically denied these reports.
Amended Relief In the Polish Deal 2.0
It should be noted that, however, the Ministry of Finance noted the media turmoil. In the first Project Polish Deal 2.0 (i.e. amendments to Polish Deal) on 24 March 2022 The relief was completely removed. In the second project with 12 April 2022 The relief was left at least in a truncated version.
After first, it was decided that the deduction from the tax base of expenditure relating to the acquisition of historic property would not apply at all.
After second, an additional condition will be introduced that the deduction of expenditure on conservation, restoration or construction works in the historic property will be possible only after they have been completed and not as at present at the time of this cost (i.e. in a given tax year).
After third, the above deduction will be required to obtain a certificate of the provincial conservator of monuments confirming the performance of these works.
For example, if the taxpayer is renovating the property 3 years will be deducted only In the third one year after obtaining the certificate.
If amendments to Polish Deal will be implemented according to second version of the bill, i.e. from 1 July 2022, It's based on Article 16 and Article 31 This law changes the relief for the protection of monuments will enter into force from 1 January 2023
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.