May 2023

How do New Tax Provisions Impact PRS Funds?

The issue of taxing “wholesale” apartment purchases resurfaced on Friday 26 May 2023. Poland’s Lower House, the Sejm, held another reading of the proposed amendment to the Real Estate Management Act, which included a provision on taxing such purchases. Specifically, the amendment provides for a 6% civil law transactions tax (CLTT) on the purchase of a sixth or subsequent apartment on a single land property, whether in one or multiple buildings. These changes are not expected to have a major impact on PRS funds.

Additional Taxation Rules

According to the proposed amendment, the obligation to pay an additional 6% CLTT will apply to the purchase of at least six apartments if the following conditions are met jointly:

  • apartments are located in one or multiple buildings on a single land property;
  • apartments constitute separate properties.

Additional taxation will also apply in the case of purchasing new residential properties – in addition to VAT, which means that the same transaction will be taxed simultaneously with VAT and CLTT.

Exemption for First Apartment Purchase

The proposed changes provide for the abolition of 2% CLTT in the case of individuals purchasing their first apartment on the secondary market.

Legislative Stage

The amendment introducing additional taxation was submitted and adopted only after the second reading in the Sejm, at a Sejm committee meeting on 26 May. According to the information on government websites, the Sejm adopted the proposed amendment on the same day. Therefore, the amendment will now be reviewed by the Senate.

Impact on PRS Funds

The proposed changes pertain to the taxation of private rented sector (PRS) funds, which has been in the works for several months.

However, the language of the proposed amendment suggests that additional taxes will only apply to the purchase of individual apartments that constitute separate properties at the time of the transaction. Therefore, if buyers (including PRS funds) acquire the entire building (without separating the apartments), they should not incur additional taxation.

At the same time, the previously announced vacancy tax and restrictions on purchasing multiple apartments (limiting entities with at least five apartments to only one apartment purchase per year) have been put on hold.

Download the pdf in English;
Download the pdf in Polish.

Please note that the proposed regulations are subject to change.

If you have any questions regarding this matter, please get in touch with:

Piotr Prokocki, Head of Tax;
Klaudia Szczepanowska, Junior Tax Associate.