Polish Property Tax Overview
This article gives an overview of the main taxes that a property owner would need to deal with in Poland.
Sim Property’s property management & accountancy service can help you with all such Polish taxes in more detail, contact us for more information.
Personal tax number
Property owners must register themselves for tax purposes and obtain a NIP number.
Properties in Poland must be registered for property tax. It is typically paid in 4 installments throughout the year (15th March, 15th May, 15th September, 15th November), but can be paid in one installment. You only pay property tax for the period you own the property. Property taxes are grouped by city/town (if you have more than one property in a city, in some cities there will be just one payment for all your properties and in other cities there will be a separate payment for each property).
It is common for property owners to have to pay Perpetual Usufruct on their properties to the government. This is paid in one amount for the year based on who owns the property on the 1st January, the payment deadline is 31st March of the same year.
Income tax on rents
There are two main methods to pay income tax on rental income in Poland – the flat rate method and the progressive method. This is usually paid monthly (or it can be paid quarterly on the flat rate method if the income in the previous year is less than 25,000 EUR).
You must inform the local tax office (in writing) which method and payment period you will use by the 20th January each year otherwise it will automatically be assumed you are using the progressive method and paying monthly and this can’t be changed until the following year. In the following year the tax office will assume you will continue to use the same method as the previous year unless you inform them otherwise.
The local tax office must be informed when you start receiving income in Poland by the 20th of the month following the month you first received income. This only applies if you are using non-standard calculation methods and periods, which means when you use the progressive method with monthly payments the tax office doesn’t have to be informed.
The tax year is from 1st January to 31st December.
- Flat rate method:
- Gross rental income taxed at 8.5% and is treated as a separate income.
- Can’t deduct any expenses.
- Income tax declaration/return must be made by 31st January each year.
- Progressive method:
- Takes total Polish income (from gross rents and other sources) and deducts costs.
- Tax is applied at a rate of 18% (up to 85528 PLN/yr) or 32% (above 85528 PLN/yr).
- Start paying when your net rental income exceeds 3091 PLN (tax allowance). If in the first month net income is less than 3091 PLN you don’t pay anything, but you have to add this income to next month’s income.
- Expenses can include property tax, renovations, depreciation and management fees. Mortgage interest is a deductible cost.
- Costs incurred with the property before rental income is received can be depreciated. Depreciation starts in the following month after receiving your first income. The depreciation rate for properties is 1.5% of the property value per year. The depreciation rate can also be increased up to 10% per year for the properties bought as „used“ (which means it’s been used for at least 5 years before the you purchased it) or for properties „improved“ (which means that the new owner spent at least 30% of the property initial value in order to improve it). Costs after receiving rental income can be deducted directly.
- Income tax declaration/return (PIT 36) must be submitted to the tax office by 30th April each year.
Previous years losses can be carried forward for 5 years, but only 50% of one year’s loss can be used in one tax return.
Tax on rental income must be paid by the 20th of each month after it was received.
Property Sales Taxes
There is no property sales tax in Poland. That said, there are a notary fees to pay when selling (usually covered by the buyer, unless it is agreed differently).
Sellers must file a property sales tax return (PIT-39) when selling a property, if the seller has owned the property less than 5 years.
The buyer of a Polish property has to pay a purchase tax of 2% if buying a secondary market property and notary fees.
For properties bought on the primary market, there is no purchase tax (though VAT applies on primary market properties).
Capital Gains Tax
Polish capital gains tax is 19% (the same rate as corporation tax and tax on dividends).
CGT is paid when property is sold within 5 years from the purchase date (the purchase date is the end of the year, when the deed was signed).
CGT could be avoided if:
- the property is sold after 5 years of ownership
- the net income would be spent for “property purposes” within 2 years of selling the property
Property purposes means spending the net income on:
- the purchase of an apartment, house or land or shares in such properties for your own use
- the purchase of property rights or shares in the rights such as perpetual usufruct , cooperative rights for own use
- modernization, conversion, extension of your own residential property
- conversion of non-residential property into residential property for own use
- paying off the mortgage
This applies to all properties located in the EU, EEA (European Economic Area) and Switzerland.
After the property sale, when CGT applies a tax declaration PIT-39 has to be submitted to the tax office, even if the money is going to be reinvested and there would no tax to pay (in such a case it has to be marked on the declaration that it is exempt).
If declared that the money is not re-invested within 2 years, then tax the declaration has to be corrected and the corrective declaration submitted to the tax office.
The PIT-39 has to be submitted in the following year, after the property was sold, the deadline for submission is 30th April. It does not have to be submitted at all if the property was owned for more than 5 years.