Tax on commercial property

In January 2018, the tax on commercial property came into force. It is a charge that must be paid by owners of retail and service or office buildings, provided that their initial value exceeds 10 million PLN.

The new tax on commercial property

The new legal provisions are set out in the income tax acts. The legislator placed their details in Article 30g of the PIT Act and Articles 24b and 24c of the CIT Act. Under the recently introduced rules, free-standing shops and boutiques, shopping centres, department stores and all other properties classified as office buildings are subject to taxation. It is known that their owners must pay income tax to the state. It amounts to 0.035 percent of the tax base, which means that the annual burden is approximately 0.42 percent of the initial value of the structure in use. Let us add that the tax on commercial property is calculated on general principles. The legislator also requires each taxpayer to whom this provision applies to calculate the amount of this new levy for the state every month and pay it to their competent tax office by the 20th day of the month following the month for which the tax is paid, i.e. the payment for May 2018 should be settled by 20 June 2018 at the latest.

Tax only on property worth more than 10 million PLN

Under the new rules, the tax base is the part of the initial value of the commercial property that exceeds 10 million PLN. The mechanism for calculating this new tax is best understood through an example. Let us assume that a company owns a building housing a shopping centre. If the value of this property is 15 million PLN, the tax base is 5 million PLN, and the tax is – let us recall – 0.035 percent of the tax base per month. This means that the monthly charge paid by the company to the state is 1,750 PLN (21,000 PLN a year). It is also worth noting that if a company has several properties whose total value exceeds 10 million PLN, the tax described is not charged. The values of properties are not added together.

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The new rules are unclear

In creating the new rules, the legislator decided that the tax base cannot be reduced by depreciation write-offs from the initial value of the property. It also assumed that the base will be increased if improvements have been made to the building, that is, if additional costs have been incurred. Experts also stress that the new provision introduces a kind of legal fiction. It assumes that the taxpayer records income of 10 million PLN. This means that the new tax is treated as a property tax, yet has been classed among income taxes and must be paid even when the taxpayer's property makes a loss. The last problem raised by commentators is that the issue of double taxation of a given property arises (property tax and the new legal regulation).

The new legal provisions arouse a great deal of controversy, but there is a way to deal with them. It is necessary to consult top-class experts. The specialists at REMAX Gold will clarify these complexities and help you find your way through the new rules.