Tax Highlights for Real Estate – April 2024

1. The draft law implementing Pillar 2 Directive (global minimum tax)

On 25 April 2024, a draft bill introducing provisions on the so-called global minimum tax was published on the website of the Government Legislation Centre. The aforementioned bill is intended to introduce to the Polish legal order the EU Council Directive of December 14, 2022, No. 2022/2523 on ensuring a global minimum level of taxation for international groups of companies and large domestic groups in the European Union (Official Journal of the European Union L 328 of December 22, 2022, p. 1). This directive provides for the implementation of the Global Anti-Base Erosion Model Rules (the “GloBE rules”) in the European Union, which constitute the main part of the OECD’s so-called Pillar II. According to the GloBE rules, the largest international enterprises will undergo an annual assessment to determine if they meet the minimum effective tax rate requirement: 15%. If the effective tax rate on income for a particular international group in a specific jurisdiction falls below 15%, an appropriate top-up tax will be imposed on that group.

2. The moment of tax obligation in VAT for the performance of the services for the connection of the contractor’s facility to the electricity grid

On April 18th, in a judgment ref. III SA/Wa 8/24, the Administrative Court in Warsaw ruled that signing a written protocol confirming the connection of an object to the grid concludes this service and is its essential, inseparable component. From the above if follows that the provision of the services of connecting an object to the grid takes place when the acceptance protocol is signed, and it is then that the tax obligation in VAT arises.

3. Taxation of dormitories with the minimum tax on revenues from buildings

Pursuant to Article 24b(1)(2) of the CIT Act, fixed assets that are buildings which have been handed over in whole or in part for use under a lease, tenancy or other similar agreement are subject to the so-called tax on revenues from buildings. On April 17th, the Supreme Administrative Court ruled that the provision of accommodation in student dormitories is not based on an agreement per se but within the framework of an in-house relationship between the student, doctoral candidate, or intern and the administrative law institution i.e. the university. The above excludes the possibility of considering this relationship as similar to the agreements listed in Article 24b(1)(2) of the CIT Act, and therefore the condition for taxing the student residence with the so-called tax on revenues from buildings will not be met.

4. WHT exemption on interest in case of a merger of companies

Pursuant to Article 21 of the CIT Act, one of the conditions for exempting interest paid by a Polish entity to a foreign entity from WHT is that one of these entities holds at least 25% of shares in the other entity for a period of at least two years.

In a ruling of 9 April 2024, ref. II FSK 1060/21 the Supreme Administrative Court stated that a merger of companies does not interrupt the aforementioned two-year period. From the aforementioned judgment it follows that, in line with the provisions of art. 93 § 1 and § 2 of the Tax Ordinance, a company, as the successor of the acquired entity, enters into all the rights and obligations of that entity, thus also into the right to apply the WHT exemption. The court confirmed that this is in line with the objectives of Council Directive 2003/49/EC, which sets out the principles of the WHT exemption in question, which were implemented to the Polish CIT Act. The judgment in question confirms the stance which was confirmed in the judgments of 17 May 2019 ref. II FSK 1546/17, of 25 November 2015 ref. II FSK 2458/13 and II FSK 2929/13, of 22 October 2014 ref. II FSK 2516/12 and of 26 March 2013 ref. II FSK 1675/11.