I am a landlord in Poland. How do I tax my real estate derived income?

An investment in a real property in Poland is usually a good idea. Ownership of an apartment for example can be a stable source of a passive income at the same time you should make sure that follow some simple guidelines. Make sure that you have prepared everything by following this short check list:
– Have a written lease agreement with your tenant;
– Make sure that your rent is payable to your bank account;
– Make sure you report your income to the tax authorities.

A simple explanation to why you need a lease agreement and why it is recommendable to receive payments to your bank account is that in case the flat is used for any unlawful purpose, you have a proof that you were not a part of any illegal scheme. Specifically, that you only rented the property for purposes clearly specified in the lease contract.

Your rental income in Poland need to be reported to tax authorities and taxed. Here you have a choice between:
• Default tax rate of 18% on income. The taxable basis is constituted by the rent amount minus tax deductible expenses. The rate of 18% applies to earning up to PLN 85,528 yearly. Income exceeding this amount is taxed with a rate of 32%;
• Reduced tax rate of 8.5%. The taxable basis are the earnings with no right to deduct any costs. The rate 8.5% applies for income up to PLN 100,000; for the excess over that amount, the tax rate amounts to 12.5% of revenues.

While choosing between rates there are following things to be considered:
– The amount of your monthly costs e.g., renovation expenses, carried out during, mortgage interest, depreciation write-offs;
– How are payments for media made? Note that cost reimbursement received by you from the tenant may be qualified as a taxable income. Here a well-written lease contract may become handy;
– With a default tax rate you can also take advantage of tax free amount of PLN 8 000 (may be increased to PLN 30 000 in 2022);
– The right to use a reduced tax rate may be questioned by tax authorities in situation where you rent multiply apartments.
Before you start your excel calculations, note that in most scenarios the more beneficial option will be the reduced tax rate of 8.5%. This taxation method is chosen by over 80% of taxpayers in Poland.

How do I inform the tax office of my choice? You do not. All it takes is to self asses the tax amount, with the preferred taxation method, and pay it to the tax office before 20th of the month following the renting period. You do not need to notify the tax office or make tax filling though out the year.

After year-end you need to prepare a tax statement respectively the PIT-36 before April 30th in case of default tax rate and PIT-28 before January 31st in case of a reduced rate.

Please note that, taxation of your rental profits applies regardless of your tax residency status in Poland.

 

Author:

Jerzy Gaweł
Partner – Tax Advisor