Poland

Legal and tax aspects of
investing in real estate
Debt Financing (Loans): civil law
transaction tax
Loans are generally subject to civil law
transaction tax at the level of 2% of the loan
principal. The tax must be paid within 14
days of the date of the loan agreement, and
the tax liability rests with the borrower.
Nevertheless, the following types of loans
are exempt from taxation:
• loans granted by shareholders to a
limited liability company or joint stock
company;
• loans granted by foreign entities which
are engaged in credit and financing
activities (such as group treasury
companies);
• loans recognized as an activity subject
to Polish or foreign VAT (e.g. bank
loans);
• financing granted as a part of business
activity is recognized as a financial
service specifically exempt from VAT;
therefore, no civil law transaction tax
applies.
Withholding tax on interest
Generally, interest paid from Poland
to a foreign lender is subject to a 20%
withholding tax. This rate applies unless
the relevant tax treaty provides otherwise.
Please see Appendix for a list of withholding
tax rates under Poland’s various tax
treaties. Under the tax treaties, it is
generally stipulated that if withholding tax
is payable it can be credited against the
corporate income tax of the foreign lender.
As in the case of dividends, in order to
apply a treaty rate, a certificate confirming
the tax residence of the foreign lender must
be obtained.
After joining the European Union, Poland
implemented the EU Directive 2003/49/
EC on the common system of taxation
applicable to interest and royalty payments
made between associated companies of
different Member States. One of the main
purposes of the Directive is to abolish
withholding tax imposed by the country
from which payments of interest and
royalties originate when such payments
are made between “qualifying EU entities”,
i.e. payments made between parent and
subsidiary, subsidiary and parent and
between direct sister companies (in all
cases a minimum 25% stake and 2 year
holding period is required). As a result
of that, a withholding tax exemption on
interest payments made between parent
and subsidiary, subsidiary and parent, and
between direct sister companies (in all cases
a minimum 25% stake and 2 year holding
period is required) is currently available.
The 2-year holding period condition can
be also met prospectively, i.e. after the
actual interest payment. If the condition
to hold shares for an uninterrupted period
of 2 years is not satisfied, outstanding
withholding tax (as a rule 20%) together
with the penalty interest for late payment
will be due. Penalty interest is charged from
the day following that the day on which the
above period expires.
In order to benefit from that favorable
treatment the payer should hold recipient’s
certificate of tax residence. An additional
requirement is that the payer should also
hold the recipient’s confirmation that the
recipient does not benefit from the tax
exemption on its worldwide income.
Poland. The real state of real estate | 81