Property development companies vs. real estate companies
21 June 2022
21 June 2022
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.
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:
An operating entity is considered a real estate company if:
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 further questions or require additional information, please contact your business relationship person or use the enquiry form on the HLB Poland website.