Real Estate Industry Facing Constant Tax Changes
The tax on commercial real estate, changes with respect to recognizing tax deductible expenses, reverse charge on construction services, are only some of tax solutions introduced in the real estate industry in Poland. Unfortunately, this is not the end of it.
2018 has seen a number of new tax developments in the real estate market. We observed changes both with respect to effective regulations as well as the introduction of completely new solutions, which so far haven’t been in use in Poland. Furthermore, it seems that the coming year 2019 will see similar dynamics in this respect.
“One of the new developments is the minimum income tax on commercial real estate. Some solutions in that respect have already been in force. However, those regulations will be amended as of 2019,” said Krzysztof Kaczmarek, tax advisor, Managing Partner, TPA Poland.
At the same time he added that amendments had been introduced with respect to tax-deductibility of certain expenses. As of the beginning of 2018, the possibility to recognize debt financing costs and some intangible assets and services from related entities in the tax result was considerably limited. The new regulations provide for further modifications of these limits.
Moreover, it is no longer possible to deduct interest costs on debt used to purchase shares (or stocks) of a company, if they are to be ultimately settled together with the operating income of the acquired company. This means that the use of the popular debt push-down mechanism will be considerably restricted.
There have been considerable controversies and doubts regarding the VAT reverse charge in the construction sector, particularly between the landlord and the tenant.
“The number of new tax developments may be stunning, yet is is vital to be familiar with them to ensure accuracy of fiscal settlements. In order to help investors and entrepreneurs as well as their financial and accounting departments to navigate the jungle of new regulations, we have prepared our guidebook on the most important tax solutions entitled ‘What’s new in taxation of Polish Real Estate Market?’. Additionally, we indicate what awaits the industry in the coming future,” said Małgorzata Dankowska, tax advisor, Partner, TPA Poland.
The Report discusses:
- The new version of minimum tax on commercial real estate.
- Debt push down – limited possibility of tax recognition of financing costs.
- Limited deductibility of debt financing costs and intangible services.
- VAT reverse charge for construction services.
- Further planned tax changes, including determining and documentation of transfer pricing, notional interest deduction, mandatory disclosure rules.