Tax trends in Poland that every real estate investor should know

While taxes might not be the decisive factor for undertaking a particular investment project, they can become one of the key drivers that impact the economic return for investors. The tax environment for inbound investments in the Polish real estate market should look familiar to those with experience in investing in other European locations. However, there are some specific features and recent developments that a professional investor should be aware of.

This article highlights the key tax trends that you should consider when investing in Poland. As this is only an abbreviated summary, it is of utmost importance that every business decision is preceded with a detailed tax analysis based on specific facts and circumstances.

Withholding Tax
Dividends and interest (also royalties, which is less relevant for the real estate industry) paid to foreign recipients are subject to withholding tax at 19% and 20%, respectively. The rates can be lowered (even to nil) under tax treaties between Poland and the recipient’s country or the domestic implementation of the EU directives.  

As of 2022, withholding tax on payments to related entities is applied under the ‘pay-and-refund’ regime, instead of a relief at source. It means that a Polish entity remitting a dividend or interest has to collect tax at a standard rate and then the recipient (or, in some situations, the Polish payer) can claim WHT as a tax refund.

This may have a negative effect on cash flow, therefore the regulations provide for two alternatives, i.e. the exemption or application of a lower WHT rate will be possible where a Polish remitter submits to the tax authority a statement confirming that all conditions for the relief are met (however, such statement triggers personal responsibility of the managers signing it), or the tax authority will grant a clearance in a form of a special tax opinion.

The pay and refund mechanism is triggered in case the accumulated qualifying payments to the same recipient exceed 2 million złotys (£400,000).

While in general this mechanism was meant to give the tax authority better control over use of lower WHT rates and exemptions, in practice it might lead to extended refund proceedings or denial of tax refund. Therefore, it is crucial that investors carefully analyse their intended investment and financing structure in advance, to minimise the risk of adverse impact on future distribution of profits from Poland.

Tax on shifted profits
As of 2022 Poland has implemented the shifted profits tax, which aims to prevent the tax-base erosion in the form of tax-deductible payments to foreign recipients with low effective tax rates.

The shifted profits tax rate is 19% and is levied on certain categories of payments to non-resident related entities. This includes costs such as debt financing, advisory services, management, data processing, insurance and guarantees.

There are several conditions that need to be met for this tax to apply, for example:

• the qualified costs constitute at least 50% of the revenue earned by the recipient and
• the recipient’s effective tax rate on specific categories of income is lower than 14.25% and
• the qualified expenses constitute at least 3% of tax-deductible costs of a Polish payer.

The shifted profits tax shall not be levied on costs connected with payments to a related entity tax resident in an EU country, if this entity undertakes a significant, real economic activity in this country.

The Polish taxpayers are responsible for proving that an expense does not fall under the shifted profit tax obligation – burden of proof is on a taxpayer (evidenced analysis required).

Minimum revenue-based tax
Introduced in 2024, minimum tax can be imposed on revenues and certain costs of debt financing and qualifying services expenses. This is a separate tax from Pillar 2 global minimum tax (which is not discussed in this article).

The minimum tax is levied on taxpayers who report: tax losses within an operating income basket or tax profitability (income-to-revenue) ratio at 2% or lower (specific rules apply when calculating this ratio).

Tax rate is 10% on the sum of the following (subject to deductions):

• 1,5% of operating revenues
• part of costs related to debt financing and certain service fees

Alternatively, taxpayers can opt for taxation of operating revenues only (costs of debt financing and services expenses not subject to tax) but then the 10% rate applies to 3% (instead of 1.5%) of operating revenues.

Although this burden might seem significant, in practice, one of several exemptions or exceptions might often apply, which effectively reduces or even eliminates the economic burden. Nevertheless, proper analysis should be carried out for each specific case.

Minimum levy on buildings
Another form of minimum taxation should be relevant specifically to real estate investors. The minimum levy applies to entities owning commercial buildings subject to lease.

The tax base is the gross tax value of such buildings (deducted by 10m złotys per entity). The rate is 0.035% per month which works out at 0.42% per annum).

From the investors’ perspective the good news is that the minimum levy can be deducted from the regular CIT on a monthly or annual basis, which means that it will be due only if regular CIT is lower.

Still, even the excess of the minimum levy over regular CIT can be refundable after the year end, subject to specific procedure which in practice should not be extensively burdensome.

Tax depreciation of real estate assets
Every professional investor should model the expected return on the investment, taking into account revenues and costs. To model the tax impact on returns the investors should properly account for tax depreciation of assets.

Depreciation of buildings accounted for as investment properties might not be deductible for tax purposes. That is a result of recent changes to the tax law, which cap tax deductible depreciation write offs up to the level of write offs for accounting purposes. Nevertheless, the beginning of 2025 brought some positive developments in this area based on several court verdicts which confirmed that tax depreciation write offs should be deductible if a building is accounted for as an investment property. Further development of practice in this area should be monitored.

Additionally, investors interested in residential properties should be aware that, as a rule, from 2023 depreciation write offs on residential buildings/units should not be deductible for tax purposes.

Indirect capital gain tax in Poland
Investors usually plan for possible exit or partial exit scenarios. From this perspective it is crucial to bear in mind that disposal of shares deriving their value from Polish real estate (also through a chain of subsidiaries, ultimately owning Polish assets) can lead to 19% capital gain taxation in Poland. The ultimate treatment would depend on several factors, however, one should be mindful of potential Polish tax consequences of reorganisations such as disposal of shares taking place also outside of Poland, for example, several tiers higher up in the ownership chain.

Conclusion
Foreign real estate investors in Poland should navigate a local tax landscape that includes withholding taxes, minimum levies, indirect capital gains taxes and other regulations. By understanding the latest tax trends, investors can make informed decisions that enhance their investment returns and ensure compliance with Polish tax regulations. As the Polish real-estate market follows global trends and continues to evolve, staying abreast of these trends will be essential for successful investment strategies.