Real estate company in the amendment to the CIT Act
The planned amendment to the act on corporate income tax provides for the imposition of additional tax obligations on real estate companies.
The amendment defines a real estate company as an entity, including a non-company, in which at least 50% of the market value of the assets in any period of 12 consecutive months were real estate located in the territory of the Republic of Poland or rights to such real estate
In accordance with the planned changes, the real estate company will be obliged to collect and pay the tax due on the sale of shares or stocks in this company. The same will apply to the sale of all rights and obligations in a partnership, as well as the sale of participation units or rights of a similar nature (e.g. in investment funds).
In the above cases, the real estate company will be obliged to pay to the account of the competent tax office, as a payer, 19% income tax from the sale of shares, stocks or rights in the real estate company. The aforementioned obligation will apply to transactions in which at least one of the parties to the transaction is an entity without its registered office or management board in the territory of the Republic of Poland or a natural person not residing in the territory of the Republic of Poland.
Giving a real estate company the status of an income tax payer means that such management board of such company will have to strictly control all transactions with participation rights in this company and precisely determine the amount of income obtained by the shareholder of such company in order to calculate the amount of tax due. Certainly, in the case of many companies, the implementation of this obligation will be very difficult or even impossible (e.g. in the event of the sale of bearer shares).
If the real estate company does not have information about the amount of the transaction, the tax due is set at 19% of the market value of the shares to be sold, all rights and obligations, participation title or rights of a similar nature.
In a situation where a real estate company does not have a seat or management board in Poland, it will be obliged to appoint a tax representative. The tax representative will perform the duties of the payer on behalf of and for the benefit of the real estate company. It will also be jointly and severally liable with the company for tax liabilities settled in the name and on behalf of the company. If a foreign real estate company does not appoint a tax representative in Poland, it will be subject to a fine of up to PLN 1,000,000.
The proposed changes to the real estate company have met with widespread criticism, as they unjustifiably shift the obligations of the tax payer to the real estate company as well as the risk of tax default caused by an unreliable or insolvent seller of share rights. Moreover, the planned changes will also affect the party purchasing shares or stocks in a real estate company. It will be in its interest to thoroughly examine the seller’s situation and secure the payment of the tax due to the paying company, so as not to expose the company itself to the need to finance the tax due from the company’s own funds.
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