Company liquidation and real estate sale

Service-Tax

The liquidation of an enterprise may be caused by many economic factors. The question arises as to how to deal with the company's property remaining after liquidation. Special regulations apply to real estate that was previously used for business and then, as a result of liquidation, became part of private property.

Company liquidation - asset taxation

In order to properly analyze the presented issue, the content of Art. 14 sec. 2 point 17 of the PIT Act, according to which revenues from business activity are revenues from the sale of assets for consideration:

  • remaining as at the date of liquidation of economic activity or special departments of agricultural production, conducted independently,
  • received in connection with the liquidation of a company that is not a legal person or the withdrawal of a partner from such a company.

Additionally, it is worth quoting Art. 14 sec. 3 point 12 of the PIT Act - revenues from the sale of assets for consideration are not recognized:

  • remaining as at the date of liquidation of self-run business or independent special departments of agricultural production,
  • received in connection with the liquidation of a company that is not a legal person or the withdrawal of a partner from such a company
  • if from the first day of the month following the month in which the enterprise was liquidated: independent economic activity, independent special departments of agricultural production, a company that is not a legal person or there was a withdrawal of a partner from such a company, six years have elapsed and disposal for consideration does not take place in the performance of economic activity or special departments of agricultural production.

It follows from the content of the above-mentioned provisions that the revenues from economic activity are revenues obtained from the sale of those assets that have been withdrawn from economic activity as a result of liquidation. However, if 6 years have elapsed between the first day of the month following the month in which the assets were withdrawn from activity and the date of their disposal for consideration, the income from the sale of these assets does not constitute income from economic activity.

Taxation rules for real estate received after liquidation of business

The general rule in the personal income tax states that the taxable amount is the sale of real estate for consideration, if it was made within 5 years, counting from the end of the calendar year in which the acquisition took place (Article 10 (1) (8) of the PIT Act).

The above general rule does not apply to the sale of non-residential real estate used for business purposes against payment, even if, prior to the sale, they were withdrawn from business activity, and between the first day of the month following the month in which the assets were withdrawn from activity and the date of their sale for consideration, 6 years have not passed (Article 10 (2) (3) of the PIT Act).

However, if a taxpayer uses residential real estate in his business, general rules should be applied to their disposal for consideration. As a result, even if residential real estate is part of corporate property, the principles set out in Art. 10 sec. 1 point 8 of the PIT Act.

Example 1.

The entrepreneur uses the warehouse in the course of his business activity. On September 10, 2015, business activity was liquidated. As a result, if the taxpayer sells the property by October 1, 2021, the income from this transaction will still be classified as income from economic activity (despite the fact that the activity has been closed).

Example 2.

The entrepreneur purchased a flat in 2013. From the beginning of 2014, he used it in his business. On November 2, 2017, the activity was closed. On January 1, 2018, the taxpayer sold a dwelling. The proceeds from the sale will be classified as income from the sale of real estate for consideration, which is subject to tax at the rate of 19%. If the taxpayer sold the dwelling after December 31, 2018, the sale for consideration would be tax free.

The above is confirmed, among others, by in the individual interpretation of the Director of the Tax Chamber in Katowice of November 29, 2011, ref. no. IBPBI / 1 / 415-934 / 11 / ZK:

(...) it should be stated that the land and building indicated in the application (together with the accompanying infrastructure) constituted separate fixed assets used for the purposes of the economic activity previously conducted by the Applicant. For this reason, the income obtained from the sale of these assets for consideration, provided that the sale takes place before the expiry of the 6-year period, counted from the first day of the month following the month of withdrawal of these assets from the business activity conducted by the Applicant, will constitute income from the source of income specified in art. 10 sec. 1 point 3 of the above-mentioned act, i.e. non-agricultural economic activity.

Summarizing the above considerations, it should be stated that the mere fact of receiving real estate after liquidation of business activity does not give rise to a tax obligation. On the other hand, the temporal scope of taxation and the type of source of income to which the proceeds from the sale of the property obtained after liquidation should be allocated depend largely on the nature of the property.