- Rental, lease and use fees – exemptions in connection with Anti-crisis Shield 4.0
- Deferred property tax payments? Companies need to make cumulative payments by the end of September
- Loss of VAT exemption and higher tax rate when renting flats to companies
- Repayment of liabilities by transferring the property ownership right is not income – judgment of the Supreme Administrative Court
- Tax base for income from property ownership
- Conclusion of a notarial deed equal to the paid delivery of goods
1. Rental, lease and use fees – exemptions in connection with Anti-crisis Shield 4.0
Anti-Crisis Shield 4.0 entered into force on June 24, 2020 and includes, among others, regulations governing the conditions in which the rent and lease fees as well as the use fees, due to the State Treasury, are not charged for the following three months of 2020, after the month of submitting the relevant application.
Exemptions concern real estate belonging to the Treasury, used for business activities. The application may be submitted by an entrepreneur, non-governmental organization, public benefit entity or a state legal person which registered a decrease in economic turnover as a result of COVID-19.
The provisions apply to receivables due to rental, lease or use agreements concluded in the period preceding the introduction of the state of epidemic threat and epidemic due to COVID-19.
The application is submitted to the district administrator, the president of the city with district (poviat) rights or the head of a state organizational unit. The applicant cannot be in arrears in paying tax liabilities, social security contributions, health insurance, Guaranteed Employee Benefits Fund, Labor Fund or Solidarity Fund until the end of the third quarter of 2019.
A decrease in economic turnover, for the purposes of this application, is understood as a decrease in sales of goods or services, in terms of quantity or value:
• if the total turnover in any two consecutive calendar months of 2020 in relation to the total turnover for two corresponding months of 2019 decreased by a minimum of 15%, or
• the turnover for any calendar month between December 31, 2019 and the day preceding the submission of the application decreased compared to the turnover of the previous month by at least 25%.
In both cases, a month is understood to be 30 consecutive calendar days.
Moreover, according to Shield 4.0, the decision-making body of a local government unit may, by resolution, decide to reduce the annual fee for perpetual usufruct of real estate belonging to the commune, district or voivodeship real estate resources, respectively, used for business activity, due for 2020, as well as not collecting rent fees, lease fees or fees for putting the real estate for use, for the consecutive three months in 2020, in relation to real estate belonging to the commune, district or voivodeship real estate resources, used for business activities.
2. Deferred property tax payments? Companies must make cumulative payments by the end of September
Many companies that have suffered the negative economic consequences of COVID-19 have benefited from deferral of the property tax payments for April, May and June 2020 – now they will have to settle these arrears at once, by September 30.
Currently, companies have a regular obligation to pay installments for July, August and September by the 15th day of each of these months. In addition, until September 30, they have to settle the deferred payments for the previous three months, when they were granted a deferred payment date. This means a serious accumulation of payments for entrepreneurs.
In order to avoid such a financial effort, it is possible to apply for a deferral of payment to various later dates, based on the provisions of the Tax Code. The granted relief will be treated as state aid, therefore it may not be available to a company that has benefited from other types of support based on anti-crisis shields and used the full amount of public aid. In relation to the aid motivated by COVID-19, this limit is EUR 800,000.
3. Loss of VAT exemption and higher rate when renting flats to companies
The 8% VAT rate applies when the owner of the premises rented for short term with direct lending. In the case of concluding an owner contract with an intermediary, the VAT rate is 23%. It is irrelevant in this situation that the purpose of the rental – i.e. short-term accommodation – has not changed.
On June 29, 2020, the Director of National Tax Information issued an individual ruling on the preferential VAT rate for apartment rental services for short-term accommodation (reference number: 0113-KDIPT1-2.4012.316. 2020.3.AMO). The interpretation distinguishes between the case of renting directly by the applicant (natural person) and the case of subletting performed under the contract by the so-called broker or operator. In this case, operator is a limited liability company, the subject of which is the rental of the purchased apartments. The applicant would receive 70% of the net amount of the sublet rent.
The tax authority ruled that the apartment rental services for short-term accommodation provided directly by the applicant to tenants will be able to benefit from the preferential rate of 8%, as this type of service was indicated in Annex 3, item 163 to the Act.
As described in the application, in the event of signing a contract with an entity that would sub-let the property, the applicant will rent the property to the company, which will then rent the apartments on its own for short-term accommodation. The rental of apartments to the company for further subletting is subject to VAT at 23%.
4. Repayment of liabilities by transferring the property ownership right is not income – judgment of the Supreme Administrative Court
The sale price does not have to be expressed in money, it can also be the act of release from debt or set-off of counterclaims. On the other hand, the tax authority’s assertion that these activities are equivalent is erroneous – this is what the Supreme Administrative Court ruled in the judgment of July 9, 2020 (file reference number II FSK 1196/18).
In this case, a real estate encumbered with a mortgage was donated. After some time, the recipient transferred the property to the bank in exchange for the bank’s release from the debt obligations. The taxpayer stated that the act of transferring the ownership of real estate upon release from debt in accordance with Art. 10 para. 1 point 8 letter a, will not be a condition for recognizing the case of disposal for a consideration. As a result, he has no income and, consequently, is not required to pay tax.
The above statement was questioned in the individual interpretation issued by the Director of the National Tax Information, who, while maintaining a negative opinion, indicated that any activity related to obtaining financial benefits in connection with the transfer of ownership or property rights is qualified as the concept of disposal for consideration (in this case, he considered such an activity exemption from debt obligations arising as a result of a mortgage).
However, undermining the above, the Supreme Administrative Court issued a different judgment, stating that the transfer of property ownership in exchange for release from debt is not related to any consideration, because the person transferring this right does not obtain a financial gain – his property assets do not increase, but only their structure of the property changes. In substantiation of its analysis, the Supreme Administrative Court pointed out that a sale that is not expressed in monetary value may take the form of a debt relief or a set-off of counterclaims. The court emphasized that the property of the entity had decreased, so the tax authority had made an incorrect opinion on the facts from the very beginning. In conclusion, the Supreme Administrative Court indicated that the exemption from debt in the form of the transfer of the property ownership right does not constitute income for the taxpayer.
5. Tax base for income from property ownership
The individual ruling issued by the Director of the National Tax Information of July 28, 2020 (reference number 0111-KDIB2-1.4010.191.2019.1.PB) once again supports the statement presented by the tax authority that the initial value of the building, which is set at the first day of each month, may not be reduced by depreciation, due to art. 24b para. 3 indicated in the CIT Act, which does not directly define such a possibility.
Already in previous years, the issue of reducing the tax base by depreciation write-offs contributed to disputes between taxpayers and tax authorities. It should be emphasized that from 2019 the definition of the “minimum tax” is equivalent to the tax on revenues from buildings.
An attempt was made to challenge this issue in the non-final judgments of the Provincial Administrative Courts in Warsaw of April 17, 2019 (file reference number III SAM/a 1905) and May 22, 2019 (file reference number III SA/Wa 1903/18). Administrative courts agree that the regulations referring to the tax base are related to the initial value of given fixed assets. It is also emphasized that, in accordance with the applicable regulations, the values of fixed assets are determined on a monthly basis, and their values are variable, therefore they may increase or decrease depending on the applied improvements to fixed assets.
The Director of National Tax Information, challenging the position presented in the judgments, in response to the question whether, in the case of determining the value of fixed assets on the first day of each month, they may be reduced by the appropriate value of depreciation write-offs from previous months – in the substantiation of his negative answer, he indicated that in accordance with Art. 24b para. 3 of the CIT Act, the basis for taxation with the tax on revenues from buildings does not refer to the reduction of the initial value by depreciation write-offs, as, for example, in Art. 16k of the CIT Act, where this possibility is directly indicated. Accordingly, it cannot be suggested that this value could be decreased by depreciation charges.
6. Conclusion of a notarial deed equal to the paid delivery of goods
In accordance with the judgment of the Supreme Administrative Court of May 13, 2020 (file reference number I FSK 2072/19), a properly concluded sales contract in the form of a notarial deed entitles to recognize that a paid delivery of goods took place.
As pointed out by the Supreme Administrative Court, in a situation where a valid contract was concluded in the form of a notarial deed regarding the sale of land, there was a paid delivery of goods. As a consequence, the company acquiring the land has the possibility to make input tax deductions. As emphasized by the Court, the correct conclusion of the contract in the form of a notarial deed is sufficient for the recognition of an activity related to the delivery of real estate. It should be noted that pursuant to Art. 7 para. 1 of the VAT Act, the ownership of goods is transferred through the transfer of rights to dispose of goods as the owner.
The Supreme Administrative Court, recognizing the effects of the transfer, defined the conditions that should be met in the case of delivery of goods, also stating that the transfer of ownership may take place in the forms indicated by legal regulations. The Supreme Administrative Court found that the notarial deed constitutes such a basis for recognizing the competence indicated for the taxpayer, who then has the right to dispose of the property as the owner. In connection with the above, concluding a sales contract in the form of a notarial deed is sufficient to recognize the transaction as a paid delivery of goods.
Doubtful issues regarding the moment of recognition of the paid delivery of goods in the case of sale of land, and thus the determination of the moment of handing over the land, buildings or structures in this case, were resolved based on the civil legal sense of the transfer of property ownership.