Non-residential premises and tax relief: latest NSA ruling

Relief for residential purposes in PIT in Poland

Pursuant to Article 10(1)(8)(a) of the Personal Income Tax Act, the disposal of real property against payment before the expiry of five years from its acquisition or construction is subject to PIT. The tax rate is 19%.

However, it is possible to take advantage of the housing allowance, which allows taxpayers to avoid taxation of the proceeds if they sell the property before the expiry of this five-year period. The condition is that the proceeds are used for housing purposes, such as the purchase of a new flat or house.

Before deciding to buy your own property, it is worth checking whether the property you are buying meets all the conditions for benefiting from the housing allowance. As it turns out, the tax authorities take a very restrictive approach to these regulations, as confirmed by the recent judgment of the Supreme Administrative Court (NSA) in case no. II FSK 1478/21.

Purchase of real estate and PIT relief: controversy over non-residential premises

The case in which the NSA issued a judgment concerned a taxpayer who sold a house before the expiry of five years from its purchase. He used the funds obtained from the sale to purchase premises which, although formally considered non-residential, had features typical of a dwelling. The premises were located in a block of flats, on the second floor. In addition, the man bought another flat on credit in the same building, one floor above. He planned to combine the two premises into one unit.

In his application for an individual interpretation, the taxpayer asked whether the expenses for the purchase of the premises in question could be considered as housing expenses. Such a solution would enable him to benefit from a PIT relief. 

However, the tax authority stated that the regulations clearly indicate that the funds obtained from the sale should be allocated to the purchase of residential premises. In this case, the premises acquired by the taxpayer were formally considered non-residential, regardless of their intended use.

Interpretation of housing allowance regulations: what follows from the NSA judgment?

The case was reviewed by the Provincial Administrative Court (WSA), which agreed with the taxpayer. The WSA indicated that the premises acquired by the taxpayer could be considered residential, as the regulations do not define this concept. Ultimately, the Supreme Administrative Court overturned the WSA’s judgment, agreeing with the tax authorities.

The NSA stressed that the provisions on the housing allowance must be interpreted strictly, and that the purchase of non-residential premises, even in the case of plans to convert it into a flat, does not entitle one to benefit from the tax preference.

The analyzed judgment of the Supreme Administrative Court (NSA) indicates that the interpretation of the housing relief provisions may be more complicated than it seems. Therefore, it is advisable to seek professional assistance before deciding to sell your property and allocate the proceeds to housing purposes.

Our company will be happy to help you with any PIT and housing relief issues. Contact us for personalized support and be sure that you are making the best financial decisions.