Planning the sale of real estate situated in Poland it should be remembered that income received from such transaction is always taxable in Poland regardless of whether the seller is Polish citizen or foreigner. However, if real estate is sold after five years since the end of year wherein it was bought, one is not obliged to pay income tax in Poland.
As a rule tax paid in Poland will be deducted from tax that should be paid in mother countries or it will be the only taxation of such transaction. All depends on whether the mother country signed agreement for the avoidance of double taxation with Poland and what is the content of this agreement.
On the other hand the amount of tax payable in Poland and the way of its calculation depend on the period wherein real estate was bought. Owing to often changes of Polish tax regulations regarding taxation of the sale of real estate by the natural persons, three different manner of taxation discussed below can be applicable.
It has to be noted that these are rules regarding taxation of private transactions which does not constitute foreigner?s business activity.
1.   Taxation of the sale of real estate bought before 31st December 2006
As far as sale of real estate acquired before 31st December 2006 is concerned, the income (i.e. the value of the property expressed as the price specified in the sales contract, net of the selling costs) is subject to the tax determined as a lump-sum in the amount of 10% of derived income. In that case it is not possible to deduct costs incurred in order to derive income including costs of purchase of the property. Hence, income tax has to be paid even in case of the sale with loss. The income tax has to be paid without call within 14 days from the date of selling (in other words from the day of signing a notary deed). By the date of payment one is obliged to present tax declaration in accordance with the form set.
Selling real estate bought before 31st December 2006 it is possible to apply exemptions from taxation that were in force during this period. In particular the income will be free from income tax, if the seller ? within 14 days from the date of selling ? files a declaration that income derived from selling will be allocated (not later than within two years from the date of selling) for the housing purposes in Poland. Such housing purposes are for instance: purchase of new building or flat as well as construction, extension or renovation of own house or flat. However, if the income is finally allocated to another purposes, the tax will be payable at the latest on the date following expiration of two years together with accrued interest.
Obviously income derived from sale of real estate bought in period discussed in this point is free from income tax, if real estate is sold after five years since the end of year wherein it was bought.
2.   Taxation of the sale of real estate bought between 1st January 2007 and 31st December 2008
The sale of real estate bought between 1stJanuary 2007 and 31st December 2008 is taxable according to different rules. In this case income tax amounts to 19% out of net income derived from sale, what means that the amount of income (i.e. price of real estate indicated in the sale agreement, net of the selling costs) is decreased by so-called tax deductible costs (in other words costs incurred in order to derive income).
Tax deductible costs include documented costs of purchase (i.e. price of the property, notarial fee, stamp duty, court fee, costs of the real estate agent) in the amount that was really paid increased by documented expenses incurred on real estate during the possession of it, which increased its value. Tax calculated in this way has to be paid at the latest on 30th April next year after the year wherein real estate was sold (i.e. on time of filing annual tax return). Within the same time limits, one has to file separate return, in accordance with the specified samples, on income obtained (loss incurred) from the sale of real estate.
In case of selling real estate acquired during this period it is not possible to apply exemption from income tax in case of allocating the income derived from the sale of real estate (or a part of it) for housing purposes.
However, in this period so-called ?registration exemption? was introduced for people who were registered in selling real estate for permanent residence at least 12 months before the date of selling (providing that one will submit to the tax office appropriate statement on required registered residence within 14 days from the date of selling the real estate). This exemption does not apply to foreigners who are buying real estate for investment objectives, not for their own housing purposes.
Also in this case income derived from sale of real estate is free from income tax, if real estate is sold after five years since the end of year wherein it was bought.
3.   Taxation of the sale of real estate bought after 1st January 2009
As far as real estate bought after 1st January 2009 are concerned, income tax is still 19% out of the net income derived from the sale of real estate (net income is the difference between income received from a sale and tax deductible costs). Tax deductible costs include documented costs of purchase (i.e. price of the property, notarial fee, stamp duty, court fee, costs of the real estate agent) in the amount that was really paid increased by documented expenses incurred on real estate during the possession of it, which increased its value.
The tax has to be paid at the latest on 30th April next year after the year wherein real estate was sold (i.e. on time of filing annual tax return). Within the same time limits, one has to file separate return, in accordance with the specified samples, on income obtained (loss incurred) from the sale of real estate.
Once again income derived from sale of real estate is free from income tax, if real estate is sold after five years since the end of year wherein it was bought.
Changes of tax regulations introduced at the beginning of 2009 concern the exemptions from income tax. Namely, selling real estate bought after 1st January 2009 it is not possible to use ?registration exemption? discussed in point 2. However last amendment to the Polish Personal Income Tax Act has restored exemption that was in force till the end of 2006 exempting from taxation income derived from the sale of real estate that within two years from the end of year wherein real estate was bought will be allocated for own housing purposes (expenditures for these own housing purposes have to be documented). The own housing purposes may be for instance: purchase of new flat, house or building plot, renovation of the flat as well as repayment of the credit (or loan) taken for housing purposes.
Very important change is that income derived from selling the real estate is free from income tax if it will be allocated for own housing purposes not only in Poland, but also in each country that belongs to the European Union, European Economic Area and in Switzerland.
Unfortunately legal definition of ?own housing purposes? is a little bit ambiguous. Particularly it is unclear whether the seller has to allocate income from sale of the real estate in Poland for purchase of building or apartment (or for repayment of credit incurred for purchase of the apartment), in which he will be residing. For the time being it is difficult to say whether interpretation from before 2007 will be applicable in this respect, so definitive practice will have to be formed by new individual tax interpretations and decisions of administrative courts.
