Cuts on tax deductions for landlords

The current legal system provides that owners of flat/unit (residential buildings) making profits from private rental could have two options to settle the tax – according to the tax scale of 17 or 32%, or a lump sum (8.5% on revenues below PLN 100,000 and 12.5%on the surplus above PLN 100,000). Individuals settling according to the scale could benefit from the possibility of depreciation. The tax benefits for owning real estate in Poland consist in the fact that depreciation is recognized as a deductible cost. Taxpayers may pay lower income tax after deducting depreciation.

The planned amendment to the PIT regulations will introduce only a lump sum for all private landlords. This will exclude the possibility of depreciating flats. Taxpayers will not be able to deduct depreciation as a deductible expense and the amount of income tax they will have to pay to the Treasury will increase.

The proposed changes apply to all flats and residential buildings – both those that are currently depreciated and those that will be purchased after the amendment comes into force. People who intend to invest in rented premises will also lose out. They will no longer be able to deduct expenditure on renovation or purchase of equipment.

The planned date of adoption of the draft by the government is the third quarter of 2021, and the new regulations may already come into force at the beginning of 2022.