Since the beginning of this year, changes in the Polish tax on civil law transactions (TCLT) have come into force. A higher rate was introduced for the purchase of the sixth and subsequent apartments. How should interested parties manage the purchase of more apartments, taking into account this tax?
As a reminder, as of 31 August 2023, a relief in the tax on civil law transactions has been introduced. Pursuant to Article 9 point 17 of the Polish TCLT Act, sales whose subject matter is:
- ownership of a dwelling constituting a separate property;
- ownership of a single-family residential building;
- cooperative ownership right to premises for a dwelling or a single-family house
– if the buyer is a natural person or natural persons who did not have any of these rights or an interest in those rights on and before the date of sale.
In this case, the maxim that taxes are an emanation of reality works perfectly, because, as it happens in life, in order for some to have it better, others must have it worse. The introduction of the above exemption is related to the increase in the VAT rate for the purchased sixth and subsequent residential units.
This obligation has been introduced by Article 7a of the Polish TCLT Act, which states that: “If the buyer acquires at least six residential units constituting separate real estate in one or more buildings built on one land property, subject to value added tax, or shares in these premises, or has already purchased at least five such premises or shares in them, The rate of tax on the contract of sale of the sixth and each subsequent such premises in the same building or buildings or a share in such premises concluded with the same buyer shall be 6%.”
Taking into account the above, the increased TCLT to 6% will apply to buyers who:
- acquire at least six dwellings constituting separate immovable property in one or more buildings built on a single plot of land, or
- have already acquired at least five such premises.
In other words, in the case of the purchase of six units in a building or several buildings located on one plot of land, the TCLT tax rate of 6% will apply to the next premises. According to the legislator, such a construction of the provision is primarily aimed at minimizing the so-called wholesale purchase of apartments in the same housing investments.
Analysing this regulation literally, it applies directly to the entity making the purchase, and what is more, it does not refer to, for example, the beneficial owner. Therefore, it is difficult to say at the moment how the authorities will approach potential arrangements aimed at purchasing apartments by several related companies with one or more of the same beneficiaries.
In our opinion, each time a possible action in the form of the purchase of apartments in one residential investment by several different companies should have a clear and real business justification, because potentially the tax authorities may investigate whether there has been a sham or circumvention of the tax law, and making purchases in such a way is justified only by the desire to avoid higher taxation in the tax on civil law transactions. In such a situation, it cannot be ruled out that the authorities may impose a higher tax by applying the provisions of the anti-avoidance clause or the provisions on sham. At the moment, however, due to the short duration of this regulation, there is no well-established practice of the authorities in this respect.
By the way, we would like to point out that under the transitional provisions, the increased tax on tax on civil law transactions will not apply if the preliminary agreement was signed in 2023, which is also indicated by the advance tax ruling of the Director of the National Tax Information of 6 December 2023 (file reference number 0111-KDIB2-2.4014.287.2023.1.PB): “The provisions of Article 7a of the Act as amended by Article 4, as amended by this Act, shall not apply to sales contracts concluded in connection with the performance of contracts obliging to make such a sale, concluded before the date of entry into force of Article 4 of this Act (Article 13(2) of the Amending Act).”
