Sale of a parking space on the grounds of VAT, PIT and housing relief
Apart from the classic sale of real estate, such as a flat or a single-family house, taxpayers may have to deal with the issue of tax settlement on the sale of a parking space. Therefore, in the article below, we will tell you how the sale of a parking space is presented in terms of VAT and PIT. In addition, in the context of PIT tax, we will consider the possibility of taking advantage of the housing relief.
The sale of a parking space on the grounds of VAT
First of all, it should be pointed out that VAT will only occur when a parking space is sold by a VAT payer who is an entity conducting business activity.
If the sale concerns a private asset and we are dealing with a typical exercise of an individual's ownership right, this type of transaction is not subject to VAT at all.
Let us assume, however, that the seller is an active VAT payer. A question arises here about the VAT rate.
First, let us point out that pursuant to Art. 41 sec. 12 of the VAT Act, the reduced 8% tax rate applies to the supply, construction, renovation, modernization, thermal modernization or reconstruction of buildings or parts thereof included in the construction covered by the social housing program.
Very often, the sale of a parking space is closely related to the sale of the premises. If the parking space is assigned and assigned to the premises and there is no separate land and mortgage register, the sale of the whole (i.e. both the premises and the parking space) will be subject to taxation at the rate of 8%.
Since the civil law regulations treat the real estate as a single whole, it is unjustified to artificially divide the sale into two transactions: one for the premises and the other for the parking space. Similarly, the application of two different tax rates in such a case should be deemed inconsistent.
The situation is completely different when the parking space is treated as a separate property. In this case, the delivery will be subject to 23% VAT.
If the sale covers the parking space only, it is not possible to apply the reduced rate. In accordance with the above-mentioned legal provisions, the condition for the application of the 8% rate, pursuant to Art. 41 sec. 12 of the Act is the fulfillment of two conditions.
First, the scope of the activities performed must relate to the construction, reconstruction, renovation, modernization, thermal modernization of buildings or their delivery.
Secondly, the buildings or their parts related to the above-mentioned activities must be included in the construction industry covered by the social housing program, which means that in the case of housing construction, they must be residential buildings for permanent residence classified in the Polish Classification of Construction Objects in section 11. Failure to meet at least one of the above-mentioned The prerequisites mean that the transaction cannot benefit from the preferential 8% tax rate.
In view of the above, it is clear that the parking space itself does not have a residential function, and therefore the supply does not qualify for the reduced tax rate.
The sale of the parking space alone is subject to a 23% rate. In a situation where the parking space is assigned to a specific dwelling, the sale of the whole property will be taxed with a lower tax rate of 8%.
Sale of a parking space on the PIT land
According to Art. 10 sec. 1 point 8 lit. and the PIT Act, the tax is payable for the sale of real estate or part of it, if it is not performed in the course of economic activity and was made within 5 years from the end of the calendar year in which the acquisition took place.
Therefore, income from the sale of real estate, its part and a share in real estate for consideration will not arise if two conditions are met jointly:
the sale of real estate for consideration does not take place in the course of economic activity (it is not the subject of economic activity), and
was made after 5 years from the end of the calendar year in which it was acquired.
The above provision formulates a general rule that the paid sale of real estate, its part or share in real estate before the end of 5 years, counting from the end of the calendar year in which the acquisition or construction took place, gives rise to a tax obligation in the form of income tax payment. Thus, if the sale of real estate, its part or share in real estate for consideration takes place after 5 years from the end of the calendar year in which the acquisition took place, it is not a source of income, and thus the amount obtained from this sale of real estate, part or share of real estate is not taxable at all.
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As a result, it becomes very important to determine the moment of purchasing a parking space.
Assuming, however, that the sale takes place during the tax period (i.e. in the five-year period), the taxpayer must take into account the need to pay the tax.
Pursuant to Art. 30e paragraph. 1 of the Personal Income Tax Act on income from the sale of real estate against payment and the rights specified in Art. 10 sec. 1 point 8 lit. a – c the income tax is 19% of the tax base.
Pursuant to Art. 30e paragraph. 2 above of the act, the basis for calculating the tax referred to in para. 1, is the income representing the difference between the income from the disposal of real estate or rights for consideration specified in accordance with article 4. 19 and the costs determined in accordance with art. 22 sec. 6 c and 6 d, plus the sum of the depreciation referred to in article 1. 22 h of paragraph 1. 1 point 1, made from the sold real estate or rights.
As a consequence, the taxpayer is obliged to determine both the revenue - which is the price obtained from the sale - and the cost - which will be primarily the cost of purchasing a parking space. The difference between the two amounts is the taxable income subject to the 19% rate.
In terms of tax settlement, the taxpayer is required to submit PIT-39 by April 30 of the year following the tax year. The income from the sale of a parking space is therefore accounted for in a separate tax return and is not combined with income from other sources.
If the sale of a parking space takes place within 5 years from the end of the calendar year in which the acquisition took place, the taxpayer must take into account the obligation to pay 19% income tax.
Sale of a parking space and housing relief
It will not always be necessary to pay PIT, because taxpayers have the option of taking advantage of the tax exemption specified in art. 21 sec. 1 point 131 of the PIT Act.
Pursuant to this provision, if the income from the sale of real estate is allocated for own housing purposes, the sale will be exempt from tax. The disbursement must take place from the day following the date of sale and not later than the end of the third year from the end of the calendar year of sale.
The catalog of expenses for own housing purposes is also important. These will be, for example, expenses for the purchase of a new property, renovation or modernization of an existing one, or the repayment of a mortgage taken out before the sale to another property.
In the context of the issue discussed by us, it should be noted that there are no obstacles to expending funds for own housing purposes from the sale of a parking space.
A natural person who sells a parking space and allocates all the funds obtained for his own housing purposes, may take advantage of the housing relief specified in Art. 21 sec. 1 point 131 of the PIT Act.
Summing up, we can indicate that the sale of a parking space can be a tax neutral transaction both in terms of VAT and PIT. This will be the case when a natural person who does not run a business will allocate all of the revenues from sale for his own housing purposes.