Property development companies vs. real estate companies
According to the recently presented position of the Director of the National Revenue Information, a real estate developer engaged in the construction of residential and non-residential buildings and their sale may be deemed a real estate company on the grounds of income tax regulations, thus resulting in the obligation to disclose specific information concerning both the company and its shareholders to the Head of the National Revenue Administration.
Definition of a real estate company
As a reminder, a real estate company is any entity other than a natural person that is obliged to prepare a balance sheet under accounting regulations.
An entity will be considered a real estate company if it meets the conditions, which differ depending on whether the entity is a start-up or is already operating on the market.
A start-up entity is considered a real estate company if:
- on the first day of the tax year at least 50% of the market value of its assets (directly or indirectly) is constituted of the market value of real estate located on the territory of Poland or rights to such real estate, and
- the market value of these properties exceeds PLN 10 million.
An operating entity is considered a real estate company if:
- on the last day of the previous year at least 50% of the balance sheet value of its assets (directly or indirectly) was constituted by the market value of real estate located on the territory of Poland or rights to such real estate, and
- the balance sheet value of these properties exceeded PLN 10 million
- in the previous year, its revenue from: lease, sublease, tenancy, subtenancy, leasing, other contracts of a similar nature, transfer of the ownership (the subject of which is real estate or rights to the real estate) or from the shares in other real estate companies amounted to at least 60% of its total revenue.
Developers and the status of a real estate company
According to a recently issued individual interpretation from the Director of the National Revenue Information dated 6 May 2022, No. 0111-KDIB1-1.4010.523.2021.2.AW, when calculating the carrying amount of its assets, a developer should also include current assets related to the property, such as products, inventories, and goods, and not solely the value of land, buildings, fixed assets under construction and long-term investments.
With regard to the aforementioned position of the tax authority, it should be stressed that companies engaged in real estate development activities may be deemed real estate companies on the grounds of the Income Tax Acts and thus may be subject to the disclosure duties imposed on such companies by the provisions of the Income Tax Acts.
Therefore, we recommend that companies conducting developer activity (and PIT/CIT taxpayers holding directly or indirectly shares in such a company) verify whether the prerequisites indicated above are met.
It is important to note that the extended deadline for submitting the aforementioned information for the tax year 2021 to the Head of the National Tax Administration expires on September 30, 2022 (for companies with the tax year or fiscal year ending between the 31st of December 2021 and the 31st of May 2022).
If you have any questions regarding this topic or if you are in need for any additional information – please do not hesitate to contact us:
CUSTOMER RELATIONSHIPS DEPARTMENT
Head of Customer Relationships
Department / Senior Manager