Exemption from transfer tax for acquisition of first property

As of 31 August 2023, those acquiring their first flat or house on the secondary market will not be required to pay the tax on civil law transactions. However, it is already becoming apparent that the new regulations are causing controversy and ambiguity among lawyers, particularly when the acquisition of a property is made by several people.

0% Transfer tax for purchase of first property

On 31 August 2023, Polish Tax regulations were updated by the amendment to the Civil Law Activities Tax Act came into force, under which individuals purchasing their first property (flat, house, cooperative ownership right) on the secondary market are exempted from paying transfer tax (transaction tax) in the amount of 2% of the transaction price.

First problems with 0% transfer tax

As the legislation does not clearly answer all the practical doubts that have arisen, the Ministry of Finance sent a guidance letter to the National Council of Notaries, which, however, raised…new questions.

Exemption from transfer tax according to Minister of Finance

In the aforementioned letter, the Ministry took the position that a sale agreement whose object is the ownership right to a residential unit constituting a separate property, a single-family residential building or a cooperative ownership right to a residential unit or a single-family house is exempted (from PCC tax – author’s note). The sale of a share/shares in such rights is therefore not exempt. Some notaries interpret this sentence as excluding the possibility to benefit from the exemption when the real estate is purchased by two persons who are not spouses under the regime of joint property ownership. This is because only spouses jointly acquire a single ownership right; in any other case, e.g. when the property is acquired by a father and son or by persons in a civil partnership, each of them acquires his or her individual share in the property (e.g. the father acquires 50%, the son 50%, which, however, together leads to the disposal of the entire ownership right).

No exemption from transaction tax in case of purchase by two persons

Adopting a concept such as the one described above would exclude the possibility of obtaining a tax exemption in the situation of the purchase of a single property by two or more persons.

Is this interpretation correct?

It seems not. The Ministry’s position referred to a situation where one or more persons acquire only part of a share in the ownership right, on the assumption that the remainder remains with the seller, for example. On the other hand, in a situation where one property is acquired by persons, each of whom acquires his or her separate share of ownership, but together there is a disposal of the entire ownership right, the exemption will apply. This is evidenced by the fact that the Ministry, in the same position, mentions as an example of persons who may benefit from the exemption spouses, but also parents with a child, siblings, strangers who, when buying the property together, may only purchase the property in separate parts.

Certainly, practice will bring further questions that will require clarification of the new provisions.