Non-residents are taxed in Poland on income arising from Polish sources only and are liable to a number of other property related taxes outlined below. An individual is considered resident in Poland if s/he spends 183 days or more in any tax year (calendar year) in Poland.
Since joining the EU, restrictions for Non-residents to buy property in Poland have eased, however official permission from the Home Office is required for Agricultural land/forest (purchased within 12 years of joining the EU) or for buying a second house (within 5 years of joining the EU).
Tax Identification Number or NIP
Non residents in Poland, who are liable to pay certain taxes, must apply for a Polish NIP or Tax ID number. Foreigners, who are considered residents for tax purposes in Poland, need to apply for a card of temporary residence.
VAT / Transfer fees:
If you buy a new residential property from a company that is registered for VAT, the VAT rate calculated on the purchase price will be 7%. For second-hand homes and land, a property becomes second-hand 5 years after been built. Second-hand properties are exempt from VAT. There is only one exemption to this rule: if the seller is VAT registered, owns a second hand property and invested over 30% of the property value in order to improve the property, then 22% VAT is charged.
In certain cases (I.e. the supply of land which is not for development and VAT exempt buildings and constructions) the acquisition of real estate will be subject to a transfer tax (Civil Law Activities tax) at 2% of the market value of the property instead of VAT. The sale of shares in a Polish company is generally subject to transfer tax at 1% on the market value of the shares.
Ongoing property taxes payable in Poland are as follows:
The rate of tax is calculated using one of two tax methods :
1. Scaled rates 18%-32% as at January 1st 2009 (19%-40% for 2008) on rental profits after costs;
Polish Rental Income Tax return must be filed on an annual basis, however monthly payments (if first method used) or monthly or quarterly payments (if second method used) must be transferred to the tax office by January 31st.
Polish Income Tax Deadline depends on the method of payment:
Progressive scale method - payable by 30th April (monthly installments in by 20th day of the month)
Fixed rate method - payable by 31st January (monthly or quarterly installments in by 20th day of the month)
Polish Corporate Income Tax
If you purchase property in a Polish company, Polish corporate tax income tax of 19% is charged on company profits after allowable costs. Original invoices will be required to back up all costs.
Local Polish Property taxes (rates) differ per region and are also payable quarterly. Rates range between 0.33 PLN – 0.68PLN per sq. mtr (circ €0.09 - €0.17/sq.mtr).
Other applicable taxes are as follows:
Polish Capital Gains Tax (CGT) on sale of property is charged @ 19% of the gain after costs (effective for properties purchased after Jan 1st 2007). For properties purchased till prior to December 31st 2006, Polish CGT is payable @ 10% of the sale price less sale expenses. Sale of properties, which have been owned for more than 5 years, is exempt from this tax.
Polish Inheritance Tax (IHT) and Donations Non-residents in Poland are subject to Inheritance and Donations Tax on assets located in Poland. The applicable tax depends on the relationship between the deceased/donor and the beneficiary. The taxation is scaled with rates ranging between 7% and 20% of the inherited amount after tax free allowances. If the transfer takes place in Poland but neither the transferor nor the transferee is a Polish citizen or resident of Poland, then the transfer is not taxable.
Non-Resident property owners may be liable to declare Polish rental income as worldwide income within their annual tax return.
If resident in the UK or Ireland you will have to declare any income received in Poland in your annual resident tax return. There is a double taxation agreement between Poland, Ireland and the UK so double taxation relief applies in some cases. Please contact us for further details regarding double taxation relief and/or filing your Resident Tax Return.
Property Tax International can organise the completion and filing of your Polish tax returns in addition to advising on your property tax obligations in your home country.