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30-05-2017
A NEW DRAFT OF THE ACT ON REITs
On 26th May 2017, Ministry of Finance published a new draft of the act on Real Estate Investment Trusts [Act]. As announced by the Ministry of Finance, Act should enter into force as from 1st January 2018.
The term ‘real estate investment trust’ shall be understood as joint-stock company, which shares are admitted to trading on the official stock quotations market, and which fulfills following conditions:
a. has registered office or place of management located within the territory of Poland;
b. its share capital is not less than PLN 50 million;
c. possess immovable properties, shares or stocks of subsidiaries at a level not lower than 70% of the assets’ carrying value;
d. reaches not less than 80% of the net sales (revenue) from lease of the immovable properties or its parts, or from sale of the immovable properties, which were intended to lease for at least one year, or its parts, or from participation in subsidiaries or sale of shares or stocks held in subsidiaries;
e. derives revenue from lease (directly or indirectly by subsidiaries) regarding not less than three immovable properties or its parts;
f. keeps carrying value of credit or loans liabilities at the level not higher than 70% of its assets;
g. pays out the dividend annually, at the level not less than 90% of its profit for last financial year (instead of profit payment, general meeting of the company may decide to allocate the company’s profit to purchase other immovable properties/its parts, or shares/stocks of other real estate companies).
The Act provides several favorable tax incentives, which consist in:
1. CIT and PIT exemption regarding income derived from dividends and other income on distributions from profit of real estate investment trust received by its investors.
2. Temporary CIT exemption regarding income derived by real estate investment trusts from:
a. lease of the immovable properties or its parts,
b. sale of the immovable properties or its parts,
c. sale of the shares (stocks) of subsidiaries,
d. from dividends or other income on distributions from profit of subsidiaries,
– to the moment of its spent on the purposes set out in the Act.
3. CIT exemption regarding income derived by subsidiaries of real estate investment trusts from:
a. lease of the immovable properties or its parts,
b. sale of the immovable properties or its parts,
– in a part corresponding to the amount, in which, not later than till the expiry of nine months’ period after the end of the tax year, will be spent on dividend paid to real estate investment trust, or not later than till the expiry of twenty-four months’ period after the end of the tax year, will be spent on purchase or construction of immovable property or its part.
It should be noted, that CIT exemption provided for real estate investment trusts has temporary character (till the moment of income’s spent) and it is granted in proportion, in which income from point 2 will be intended and spent on dividend payment or remuneration payment to persons which are part of the executives, supervisory or control bodies.
The legislator established special 8,5% CIT rate for REITs with regard to income spent on purposes presented above. CIT prepayment, without previous summons, shall be paid by the 20th day of the month following the month, in which REIT has spent such income on abovementioned purposes.
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Should you be interested in obtaining further information or would like to discuss the impact of the above changes on your operations please contact:
Justyna Bauta - Szostak justyna.bauta-szostak@mddp.pl phone + 48 22 322 68 88,
or your tax advisor from MDDP.
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