Commercial premises rental tax – what is worth knowing?

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Every Landlord who plans to rent their commercial premises should consider in advance which tax settlement route they plan to choose. Each scenario should be taken into account, as well as the intended use of the property. As a law firm specialized in matters related to real estate rental, We provide you with the following guide.

At the end of March 2022, due to the changes introduced by the legislator as part of the Polish Order, we wrote an article in which we describe in more detail the current legal status in the field of commercial premises rental tax. It is available here: Tax on the lease of commercial premises - Polish Order and changes 2022

Division of property in the context of commercial premises

    The assets of every entrepreneur are divided into two groups. The first is company assets, which include all assets related to the business. The second group is private property and is nothing else than assets classified for the entrepreneur's personal use. From a formal and administrative point of view, however, both types constitute one whole. However, taking into account the aspect of tax law, which is very important in the case of renting commercial premises, the separation of assets into two separate groups is important.

    One of the assets that can be considered both from the point of view of corporate and private assets is real estate. In the first case, it may actually be any land, building or premises on which business activities are conducted. The private aspect of real estate is interesting and worth mentioning. Some people may forget that apart from an apartment or a house, which are automatically associated with this term, real estate can also be a commercial premises. This is why it is necessary to understand the differences between both forms, keeping in mind the tax aspect.

Income tax

    Usually (but not always), the most advantageous form of taxation of commercial premises from the landlord's point of view is a lump sum. This form assumes that if a special declaration is submitted to the Head of the Tax Office by January 20 of a given year, the rental income may be taxed at the rate of 8.5%. The situation is slightly different when the lease agreement is concluded within a year - then the declaration must be submitted no later than on the day on which the first income is received from the tenant.

    In practice, the lump sum gives the most favorable tax rates. In this case, the rates of 18% or 32% do not apply, but only 8.5% (or 12.5% if the rent surplus exceeds PLN 100,000 during the year). It is also worth remembering that the tax is calculated on the income, therefore any expenses on renovation or equipment of the premises cannot reduce the tax amount.

However, it is worth using the tax scale primarily if we are able to demonstrate relatively high costs incurred for the purchase and maintenance of the apartment. This also includes the costs of renovation, equipment and loan interest - this has been quite important lately. 

Importantly, the lump sum can only be applied in the case of private rental, i.e. when we do not deal with it professionally.

Entrepreneurs who want to rent commercial premises and use a lump sum payment must carefully determine whether the rental of this property will meet the definition of a business activity, i.e. whether the lease is continuous and organized. Administrative courts and tax authorities help determine whether and when there is a connection between real estate and business activity. This happens when:

  • the subject of the business is professional rental of premises,
  • the premises were entered into the register of fixed assets,
  • the premises were purchased or built as part of a business activity (e.g. not as a fixed asset, but as a good),
  • VAT was deducted from expenses for the purchase/renovation/modernization/construction of premises,
  • the premises were withdrawn from business and transferred to "private" property for further "private" rental.

VAT

    Every company, regardless of its size, is subject to VAT. In reference
for renting commercial premises, it is also an element subject to tax rules. Interestingly, the authorities may consider the lease as private, which has no connection with the business activity, and at the same time recognize the value of VAT as related to the company. The reason for this state of affairs is the different definitions of activity contained in tax laws.

    What is helpful in this matter is the knowledge that VAT on the lease of commercial premises does not have to be paid at all. The solution in this matter is one of two solutions:

  • residential premises intended for residential purposes, regardless of the rent
    are exempt from VAT,
  • The subjective exemption assumes that transactions made by an entrepreneur who
    in the previous calendar year it generated sales of less than PLN 200,000. PLN is also exempt from VAT.

Choosing the right form

When wanting to rent commercial premises, entrepreneurs have three options:

  • apply a lump sum and issue an invoice for the rent - only if the lease is private and subject to VAT,
  • rental income can be taxed as a lump sum, and an invoice or bill can be issued - only if the lease is private and the entrepreneur takes advantage of the exemption,
  • if the lease is of a corporate nature, then PIT and VAT may be settled as part of the business activity.

    As a rule, the second and third options are chosen more often, while the first one occurs when the property is taxed as a lump sum and the annual sales are higher than PLN 200,000. zloty.
In such a situation, the rental of private commercial premises, subject to lump sum taxation, obliges the entrepreneur to issue an invoice with the 23% VAT rate.

If you have any questions or doubts, please visit us initial consultation regarding the lease of commercial real estate - both in terms of taxes and the preparation of a lease agreement that well protects the interests of the owner of the premises. You can arrange a meeting online, and also by e-mail by contacting us at the following address biuro@klodzinskikancelaria.pl, and even by phone. Consultations regarding the lease of commercial premises are settled according to: The Law Firm's price list for business clients.

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Every Landlord who plans to rent their commercial premises should consider in advance which tax settlement route they plan to choose. Each scenario should be taken into account, as well as the intended use of the property. As a law firm specialized in matters related to real estate rental, We provide you with the following guide.

At the end of March 2022, due to the changes introduced by the legislator as part of the Polish Order, we wrote an article in which we describe in more detail the current legal status in the field of commercial premises rental tax. It is available here: Tax on the lease of commercial premises - Polish Order and changes 2022

Division of property in the context of commercial premises

    The assets of every entrepreneur are divided into two groups. The first is company assets, which include all assets related to the business. The second group is private property and is nothing else than assets classified for the entrepreneur's personal use. From a formal and administrative point of view, however, both types constitute one whole. However, taking into account the aspect of tax law, which is very important in the case of renting commercial premises, the separation of assets into two separate groups is important.

    One of the assets that can be considered both from the point of view of corporate and private assets is real estate. In the first case, it may actually be any land, building or premises on which business activities are conducted. The private aspect of real estate is interesting and worth mentioning. Some people may forget that apart from an apartment or a house, which are automatically associated with this term, real estate can also be a commercial premises. This is why it is necessary to understand the differences between both forms, keeping in mind the tax aspect.

Income tax

    Usually (but not always), the most advantageous form of taxation of commercial premises from the landlord's point of view is a lump sum. This form assumes that if a special declaration is submitted to the Head of the Tax Office by January 20 of a given year, the rental income may be taxed at the rate of 8.5%. The situation is slightly different when the lease agreement is concluded within a year - then the declaration must be submitted no later than on the day on which the first income is received from the tenant.

    In practice, the lump sum gives the most favorable tax rates. In this case, the rates of 18% or 32% do not apply, but only 8.5% (or 12.5% if the rent surplus exceeds PLN 100,000 during the year). It is also worth remembering that the tax is calculated on the income, therefore any expenses on renovation or equipment of the premises cannot reduce the tax amount.

However, it is worth using the tax scale primarily if we are able to demonstrate relatively high costs incurred for the purchase and maintenance of the apartment. This also includes the costs of renovation, equipment and loan interest - this has been quite important lately. 

Importantly, the lump sum can only be applied in the case of private rental, i.e. when we do not deal with it professionally.

Entrepreneurs who want to rent commercial premises and use a lump sum payment must carefully determine whether the rental of this property will meet the definition of a business activity, i.e. whether the lease is continuous and organized. Administrative courts and tax authorities help determine whether and when there is a connection between real estate and business activity. This happens when:

  • the subject of the business is professional rental of premises,
  • the premises were entered into the register of fixed assets,
  • the premises were purchased or built as part of a business activity (e.g. not as a fixed asset, but as a good),
  • VAT was deducted from expenses for the purchase/renovation/modernization/construction of premises,
  • the premises were withdrawn from business and transferred to "private" property for further "private" rental.

VAT

    Every company, regardless of its size, is subject to VAT. In reference
for renting commercial premises, it is also an element subject to tax rules. Interestingly, the authorities may consider the lease as private, which has no connection with the business activity, and at the same time recognize the value of VAT as related to the company. The reason for this state of affairs is the different definitions of activity contained in tax laws.

    What is helpful in this matter is the knowledge that VAT on the lease of commercial premises does not have to be paid at all. The solution in this matter is one of two solutions:

  • residential premises intended for residential purposes, regardless of the rent
    are exempt from VAT,
  • The subjective exemption assumes that transactions made by an entrepreneur who
    in the previous calendar year it generated sales of less than PLN 200,000. PLN is also exempt from VAT.

Choosing the right form

When wanting to rent commercial premises, entrepreneurs have three options:

  • apply a lump sum and issue an invoice for the rent - only if the lease is private and subject to VAT,
  • rental income can be taxed as a lump sum, and an invoice or bill can be issued - only if the lease is private and the entrepreneur takes advantage of the exemption,
  • if the lease is of a corporate nature, then PIT and VAT may be settled as part of the business activity.

    As a rule, the second and third options are chosen more often, while the first one occurs when the property is taxed as a lump sum and the annual sales are higher than PLN 200,000. zloty.
In such a situation, the rental of private commercial premises, subject to lump sum taxation, obliges the entrepreneur to issue an invoice with the 23% VAT rate.

If you have any questions or doubts, please visit us initial consultation regarding the lease of commercial real estate - both in terms of taxes and the preparation of a lease agreement that well protects the interests of the owner of the premises. You can arrange a meeting online, and also by e-mail by contacting us at the following address biuro@klodzinskikancelaria.pl, and even by phone. Consultations regarding the lease of commercial premises are settled according to: The Law Firm's price list for business clients.

Rate this post