Polish reporting obligations of (foreign) real estate holding companies
On 23 February 2023 the Minister of Finance issued the General Interpretation No. DD5.8203.7.2022, which resolves some of the doubts related to the reporting obligations of foreign real estate holding companies.
The regulations of the Polish Corporate Income Tax Act (the CIT Act) impose an obligation to report to the Head of the National Revenue Administration information on entities that either directly or indirectly hold shares (stock), rights and obligations, participation titles or similar rights in “real estate companies” (within the meaning of the CIT Act) by the end of the 3rd month following the end of a tax year. The obligation applies both to real estate companies and taxpayers who either directly or indirectly hold shares and rights in real estate companies.
The wording of the abovementioned provisions has raised doubts as to what are the groups of entities required to submit the information to the Head of the National Revenue Administration. The doubts concerned especially the question of whether the mere fact of holding shares (stock) or other rights in a real estate company is enough for the disclosure duty to arise, or whether it is necessary for a tax obligation to exist in Poland on any account throughout the tax year which the information concerns (in order for a foreign owner to become a taxpayer).
Minister of Finance’s Clarifications
According to the clarifications, the purpose of the legislation is for the tax administration to obtain information on entities that in the event of disposal of shares (stock) in a real estate company may be required to pay tax in Poland.
Consequently, according to the Minister of Finance, the obligation applies both to entities that are Polish tax residents and entities that are not Polish tax residents, i.e., entities that do not have their place of residence, their registered office, or their management in Poland.
According to the Minister of Finance, the reporting obligation applies where a foreign corporate taxpayer holds shares (stock) in a Polish real estate company either directly or indirectly, including through a tax transparent vehicle, albeit the obligation does not seem to apply to transparent vehicles as such.
Moreover, the information obligation arises irrespective of whether income (revenue) from the shareholding, or from any other source, was received during the tax year which the information that is to be submitted concerns. This implies that the mere fact of owning shares in a real estate company – directly or indirectly – triggers the information obligation.
The CIT Act does not specify what are the consequences of failing to submit, or of submitting the information late. Nevertheless, a taxpayer who does not comply with the obligation to report the ownership structure of a real estate company will face a penalty under the Penal and Fiscal Code.
In this context, failure to submit the required tax information to the tax authority on time is subject to a fine of up to 120 daily rates, i.e., PLN 5.5 million (or EUR 1.2 million).
As the deadline for filing tax information on real estate companies approaches, we recommend for you and your Group to review the reporting obligations that may apply to real estate companies and their shareholders. Should you have any questions or concerns regarding the issues raised in this information, please do not hesitate to contact us.