Tax on revenues from buildings – tax refund possible
On 10 May the Polish Sejm adopted the Act amending, among others, the provisions on the corporate income tax. Currently the Act is under review of the Senate. It will probably enter into force still before summer holidays.
Among several significant changes – correcting obvious legislative errors made during previous amendment of the provisions on income taxes, special attention should be paid to amended provisions on the minimum tax, which in the amending Act has been specified as “tax on revenues from buildings”.
As we have already informed, the new regulations may significantly increase tax burdens for owners of commercial properties in Poland.
First, the tax will cover all buildings, so also logistics and warehouse centres (which have not been subject to tax to date). And the authors of the amendment envisaged that the tax will be chargeable on buildings provided for use on the basis of lease, tenancy or other agreement of similar nature. If only a part of a building is provided for use – the tax will be calculated in proportion of the leased space to the total space of the building. It is also worth noting that residential buildings developed for social purposes will not be subject to tax.
Second, the tax-free amount will be calculated not for each building separately, but only once – for every taxpayer.
Let us assume that Company X owns 3 buildings with the following initial values: (i) A – PLN 12,000,000, (ii) B – PLN 3,000,000 and (iii) C – PLN 2,000,000.
According to the provisions prevailing now, the tax is charged only on building A and the taxable base is PLN 2,000,000, so the monthly tax amounts to PLN 700.
After the amendment, the tax will be charged on all three buildings, the taxable base will be PLN 7,000,000, and the monthly tax will amount to PLN 2,450.
We should also note the regulation concerning related parties. According to the current provisions, if a building is co-owned by related parties, the tax reducing amount (PLN 10,000,000) is taken into account proportionally in the initial value of each of the co-owners.
The new regulations seem to go in the direction where revenues from the ownership of buildings will be settled jointly by the taxpayer and entities in which such taxpayer holds, directly or indirectly, at least 25% of shares.
This solution means that companies should start preparing already now intercompany procedures for the exchange of information about the value of buildings, as it will be necessary in order to calculate the tax correctly.
But first of all, the amendment envisages the possibility to apply for refund of tax that has not been deducted from monthly (quarterly) tax advances – so it has been actually paid to the budget.
Tax authorities will be obligated to refund the tax on revenues from buildings if they do not find any non-conformities in the tax return filed, especially if the costs of debt financing incurred in connection with the acquisition or development of the building, as well as other revenues and costs, were determined on an arm’s length basis.
What is important – it will be possible to apply for tax refund also with respect to the tax paid in 2018.
We assume that tax refund will be preceded by respective tax inspection. Therefore, we recommend making appropriate preparations for the procedure. Earlier identification of potential tax risks and drawing up relevant documentation will help preparing the company for a visit of fiscal officials.
Daniel Więckowski, Tax Advisor, ATA Tax Sp. z o.o.