May 2024

International Real Estate Investors Required to Report

In 2021, Poland adopted new regulations to tighten taxation rules for transactions involving the sale of shares in real estate companies. Most of Poland’s double tax treaties included real estate clauses which stated that income from the sale of shares in a company whose assets mainly consist of real estate located in Poland would be taxed in Poland. As a result, the legal framework for taxing such sales was already in place; however, effective enforcement of the applicable rules was the missing piece of the puzzle.

Reporting Obligations

To remedy this gap, Polish lawmakers required real estate companies to provide detailed information on their ownership structures each year. This applied to both the companies themselves and their shareholders, even indirect ones. This year, businesses will be required to submit such reports for the third time. The goal is to provide tax authorities with the tools to track changes in capital structures and identify any transactions that may be taxable in Poland.

Defining a Real Estate Company

Poland’s companies income tax act (CITA) defines real estate companies as those jointly meeting the following three criteria:

  • At least 50% of the balance sheet value of their assets is linked (directly or indirectly) to real estate located in Poland;

  • The balance sheet value of such real estate exceeds PLN 10 million; and

  • Over 60% of their revenue comes from real estate, real estate rights, and shares in other real estate companies.

New companies are assessed based on market value rather than balance sheet value.

Key Information to Report

Real estate companies must disclose their shareholding structures. According to a general tax ruling issued by the Ministry of Finance, only entities holding (directly or indirectly) at least 5% of shares or rights in a real estate company should report. Crucially, reporting obligations also extend to shareholders insofar as they hold (directly or indirectly) at least 5% of shares or rights in a real estate company.

Devil in the Details

The Ministry of Finance has issued a general tax ruling to clarify the extent of real estate companies’ reporting obligations, confirming that they apply to both Polish residents and non-residents. 

Even with the general tax ruling, the relevant provisions still give rise to many doubts, especially when it comes to reporting the shareholding structure of a capital group. Deciding how much information to disclose should be carefully considered on a case-by-case basis to balance the risks involved.

For more details, get in touch with the authors: Head of Tax Piotr Prokocki and Junior Tax Associate Klaudia Szczepanowska

Originally published Spring 2024 in GGI FYI