January 2024

Loopholes in New Real Estate Tax Regulations

As of 1 January 2024, the purchase of a sixth and each subsequent flat is subject to an additional 6% tax on civil law transactions, which is to curb bulk purchases that can drive up prices. However, experts warn that the regulations have several loopholes and raise concerns about double taxation.

The new rules are very selective; for example, they do not apply to PRS funds acquiring whole buildings or to investors purchasing several flats in different locations. Buying a building registered under a single title is not subject to an additional 6% tax, even if the building contains dozens or hundreds of flats.

For individual investors, the best way to avoid extra taxation is to buy flats in various locations. While it is rare for someone to buy six or more separate flats on a single piece of land, even such transactions may be carried out without the additional tax if the buyer uses several special-purpose vehicles.

In this last example, a solid business case will be required to avoid being flagged for trying to circumvent the new regulations. However, this will not be an issue with the remaining solutions, as the new regulations simply do not cover such transactions.

All of this raises questions about the feasibility of the lawmakers’ solution to the surge in new flat prices. From a legal perspective, the new regulations create an unusual situation where one transaction is subject to two indirect taxes: VAT and civil law transactions tax.

Head of Tax Piotr Prokocki

Published 10.01.2024 in prawo.pl