As part of the amendment of the income tax laws it is planned to introduce the so called minimum income tax for owners of certain commercial real estate. It is significant especially for those entrepreneurs who until now has not paid income tax on renting out real estate because their total rental revenues were lower than tax deductible expenses. Following the amendment, income tax for such entrepreneurs cannot be lower than 0.042% of the initial value of real estate underlying the making of depreciation charges.

The proposal of the law published in July by the Ministry of Finance envisages the introduction of the so called minimum CIT for taxpayers holding non-current assets in the form of commercial real estate in the territory of Poland, as well as for taxpayers who are not owners (co-owners) of real estate but use real estate and make depreciation charges pursuant to the provisions of tax laws (e.g. users under finance lease agreements).

The tax, called in the proposal of the law “income tax on revenues from the ownership of non-current asset), will be chargeable on non-current assets in the form of commercial real estate located in Poland, the initial value of which is in excess of PLN 10 million. Commercial real estate referred to above will include the following:

• commercial buildings (i.e. commercial centres, sales outlets, stand-alone stores and boutiques and other buildings for sale and service purposes),
• office buildings (excluding post office, city hall, commune office, local government office, ministerial, court and parliament buildings).

The planned tax will be payable each month, in the amount equal to 0.042% of the taxable base corresponding to the initial value of the non-current asset determined on the first day of each month as shown by the records kept. Taxpayers will be obligated to calculated the tax for each month and pay the same to the account of the competent tax office by the 20^th day of the following month.

The amendment envisages special principles for determination of the initial value of non-current assets co-owned by related parties, non-related parties and companies without legal personality.

What is important, the proposal envisages the possibility to deduct income tax on the ownership of non-current asset from the amount of income tax calculated in accordance with general principles (i.e. from a difference between revenues and tax deductible costs). It is assumed that relevant deductions would be made from income tax advances calculated in accordance with general principles. In addition, taxpayers would be able to deduct the amounts of income tax on the ownership of non-current asset paid and non-deducted during a tax year in the annual return filed for the tax year.

Taxpayers liable to pay income tax on the ownership of non-current asset will be obligated to file and disclose in the annual return non-current assets underlying the taxable base, the amount of tax due and paid, and the amounts of deductions made. It should be stressed that if the proposed regulations enter into force, the above obligation will also apply to those taxpayers who at the moment are exempted from filing CIT-8 annual return (pursuant to exemption available to certain entities in accordance with Article 6.1 of the CIT Act, i.e. for example open-end investment funds and collective investment undertakings), but in accordance with the proposed regulations will be obligated to pay income tax on the ownership of non-current asset.

In practice, this new tax charge will be a burden for those entities in the case of which CIT calculated in accordance with general principles will make it impossible to deduct the levy paid in its entirety. 

The proposal of the law is currently under opinion of individual institutions. The implementation of the regulations as they are now is highly doubtful because the minimum CIT, taking into account its structure (i.e. selective exclusion from taxation of those entities who own real estate with its value being lower than PLN 10 million, exclusion of post office buildings from taxation) may be deemed prohibited state aid for businesses with lower revenues, which has been noted among others by the Office of Competition and Consumer Protection.

The analogous changes have been envisaged also for taxpayers of personal income tax.

Małgorzata Kierczak, tax consultant, ATA Finance