Immigration law

Housing tax advantage– the newest case-law favorable for taxpayers

At the end of 2019, the Director of the National Treasury Information and the Supreme Administrative Court ruled in favor of taxpayers in important matters regarding the application of the housing tax advantage.

Disposal of the real estate does not deprive the housing tax advantage

The director of KIS issued an individual interpretation of December 5, 2019, No. 0114-KDIP3-2.4011.493.2019.2.LS,
in which he took the position according to which the taxpayer retains the right to tax exemption on income obtained from the sale of a dwelling intended for own housing purposes, i.e. expended in accordance with the objectives set out in art. 21 paragraph 1 point 131 in connection from art. 21 paragraph 25 of the Act on personal income tax (‘PIT Act’) (so-called housing tax advantage), among others for the purchase of a dwelling, in the event of a subsequent sale of the premises in the form of a donation contract.

According to the Director of KIS, the PIT Act does not limit the possibility of disposing of real estate acquired for own housing purposes, nor does it specify the minimum period after which the taxpayer may transfer ownership of the property at the acquisition of which the housing tax advantage was applied. For the application of the housing tax advantage, it is only important that the taxpayer actually uses the acquired property for the purpose of housing.

This means that the taxpayer has the right to dispose of the real estate (residential premises) in an unlimited manner, i.e. he can donate it and this action will not result in the loss of the housing discount, because the regulations do not provide for the loss of the right to this discount in the event of the sale of the real estate (residential premises) previously acquired for own housing purposes.

Purchase of the dwelling prior to sale of the previous one

In another case, the Supreme Administrative Court in Warsaw, by judgment of December 3, 2019, reference number II FSK 3933/17 finally settled between the taxpayer and the Minister of Finance regarding the possibility of application of the housing tax advantage in a situation where the funds used for the purchase of a new dwelling had been received by the taxpayer as price for sale of the another apartment before the conclusion of the sale contract transferring the ownership of the new apartment, and thus before the final sale of the recent dwelling.

The Supreme Administrative Court upheld the previous position, favorable for the taxpayer, expressed by the Voivodeship Administrative Court in Krakow in the judgment of 20 July 2017, reference number I SA / Kr 493/17. Both administrative courts have recognized that a taxpayer has the right to apply of the tax advantage even if the income obtained from the sale of the recent property is spent in full before the final transfer of its ownership to the buyer. Such a situation may take place if the taxpayer allocates funds received for the purchase of a new dwelling as an advance payment or earnest money under the preliminary contract of sale of the recent dwelling In practice, this allows taxpayers to freely apply the tax advantage for package deals, in which the purchase price of a new apartment is covered by prepayments received by the taxpayer when selling a previous real estate used for housing purposes.

Author team leader DKP Legal Marcin Kręglewski
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