New rental income tax rules in Poland for 2023

From 1^st January 2023, new rules regarding how to pay rental income tax by individuals will apply. Until now, individuals could either pay rental income on a progressive scale or using a reduced rate.

From January next year the only way to do it for individuals would be the reduced rate.  The reduced rate is 8.5% for income up to 100k PLN and 12% above this amount.

We do not have to inform the tax office we would be using reduced rate, unless we have special type of rental contract called “umowa najmu okazjonalnego” (occasional rental agreement).

The basis for tax calculation is the actual rent paid by a tenant. When calculating tax on the reduced rate no deductions connected with the property’s expenses are allowed.

Calculations and payments to the tax office shall be made each month income is received.  Tax payment shall be made by 20^th of given month for the previous month. It is also required to submit an annual tax return (PIT-28 form) by the end of April. Previously the deadline for the submission of PIT-28 was the end of January.

Compared to the progressive scale, the reduced method is a relatively simple method of payment. Rental income does not sum up with other incomes, there are no tax deductions. At the same time, if the tenant pays, there is no option not to pay the tax as it was common under the general rules.

For individuals who still want to deduct the incurred costs, the only option is to switch to business activity. Here, however, you need to calculate carefully whether the costs associated with running a business will not be higher than the potential tax to be paid at the reduced rate.

It is also worth mentioning here that from 2023 it will no longer be possible to make depreciation write-offs for residential properties. These write-offs were usually a high cost to reduce the tax base.

Foreigners from the EU who want to start a business in Poland do not have any obstacles. People from outside the EU, for example from Great Britain, must obtain a permanent residence card, which means that they must in fact live in Poland.