The Ministry of Finance plans to introduce changes to the regulations on the “Minimal Income Tax on Commercial Real Estate” (further: minCIT). These changes have been developed as a result of consultations with the European Commission. The tax will cover only rented real estate or parts thereof, and will be imposed on not only shopping centers and office buildings, but also hotels, warehouses, and residential buildings. The PLN 10 million tax-exempt amount will relate to the taxpayer concerned, not to the initial value of the given building.
The changes are aimed at closing the income tax gap and will include:
- Taxation imposed only on buildings or parts of buildings that are actually being rented out. Vacant buildings or parts thereof will not be subject to the tax. This advantageous solution for taxpayers would also apply to the minCIT paid in 2018. However, there is still uncertainty surrounding the method of calculating the tax for properties being rented in part, e.g. shopping centers, where some of the space / area remains vacant.
- Inclusion of a minCIT for all buildings being leased or rented, which includes not only shopping centers and office buildings, but also hotels, warehouses, and residential buildings (with a simultaneous introduction of an exemption, to the extent permitted by state aid regulations, for residential buildings put into use as part of national or local government programs related to public housing construction).
- The PLN 10 million tax-exempt amount, which as of now refers to the initial value of a given building, will refer to a given taxpayer after changes; thus, the number of buildings the taxpayer owns will be of no consequence (the tax exemption will apply once to the taxpayer and not for each building).
- At the same time, a tax avoidance clause will be introduced for the minCIT. The clause would apply to transfers of real estate made exclusively for the purpose of avoiding the minCIT. Such transfers (e.g. the creation of several companies in order to divide the property among them) would not be recognized by the tax authorities for the purposes of the minCIT.
- Possibility of applying for a refund of overpaid minCIT (over the CIT or PIT amount). The minCIT will be refunded after the tax authority confirms that the terms of the transactions with affiliated entities correspond to market conditions and, consequently, the validity of the income tax return. The change will apply to the minCIT paid in 2018.
Should you have any related questions, please feel free to contact our Real Estate Team advisors.