Sale of a company's real estate - what is worth knowing?
Entrepreneurs running a business often observe the real estate market. Everyone running their own business realizes that a good investment of money in a building or land can become a very profitable investment over time. The real estate market in Poland is constantly developing. There are many offers for entrepreneurs. After years of using the asset, which is real estate, the entrepreneur begins to ask himself the question - to what extent will the transaction of selling the building be profitable at a given time and whether and in what amount the transaction will be subject to personal income tax.
Sale of a company's real estate with business income
The income from the conducted business activity is the sale of assets for consideration, which are:
fixed assets or intangible assets that have been classified and included in the register of fixed assets and intangible assets,
the components of the property referred to in Art. 22d paragraph. 1, with the exception of ingredients, the initial value of which is determined in accordance with article 5. 22g does not exceed PLN 1,500,
assets that, due to the expected period of use, equal to or shorter than one year, have not been included in the register of fixed assets or intangible assets,
assets constituting a cooperative right to a business premises or a share in such a right which, pursuant to Art. 22n paragraph. 3 are not included in the records of fixed assets and intangible assets
- which are used for the purposes of running a business.
Doing business in residential buildings
Some entrepreneurs run their own business in an apartment or at home. For this purpose, they separate part of the property. However, the regulations in this case expressly exclude the proceeds from the sale of such real estate, even if used, in part for business activities. Because under Art. 10 sec. 2 point 3 of the PIT Act, the sources of income from business activity exclude assets used in truth for business activity, but not constituting a fixed asset of the entrepreneur's company.
Also in Art. 14 sec. 2 point 1c it was noted that the income from the sale of assets for consideration as part of the business activity does not include income from the sale for consideration used for the needs related to economic activity and in the running of special departments of agricultural production: a residential building, its part or participation in such a building , a residential premises constituting a separate real estate or a share in such premises, land or a share in land or the right to perpetual usufruct of land or a share in such a right related to this building or premises, a cooperative ownership right to a dwelling or a share in such a right and the right to a house a single-family unit in a housing cooperative or participation in such law.
This means that in such cases, the provisions on private transactions specified in Art. 10 sec. 1 point 8 of the PIT Act.
Sale of real estate previously withdrawn from economic activity
The legislator, providing for the possibility of a quick withdrawal of real estate from economic activity before its sale as a private transaction, introduced a restriction that even if the real estate was 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 against payment has not passed 6 years, the income will be taxed according to the rules of sale of the company's assets. It should also be added that this applies to all types of assets listed in points 1-4 above.
The provisions of personal income tax also qualify as income from the sale of assets for consideration as part of business activity:
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.
However, the revenues from the sale of assets for consideration will not be the aforementioned assets, if from the first day of the month following the month in which the following was liquidated: self-run business, independent special departments of agricultural production, a company that is not a legal person or there was an occurrence of a partner from such a company, six years have elapsed until their disposal for consideration, and the disposal for consideration does not take place in the course of economic activity.
It is worth remembering that in the event of an in-kind contribution to a non-legal person, assets received by the taxpayer as a result of the liquidation of the non-legal entity or withdrawal from such a company, the company's revenues from the in-kind contribution are exempt from PIT.
Taxation of disposal of a company's real estate
Sales revenue related to business activity arises upon the delivery of the item, but not later than on the date of the invoice or payment of the amount due. However, if a company real estate is sold, the obligation to tax this transaction will arise on the date of sale of the property right to the real estate, specified in the sale agreement. The fact that the real estate in question was released later is irrelevant. The above position is confirmed by the judgment of the Supreme Administrative Court of 10 March 2016, ref. No. II FSK 3991/13.
Taxation of business real estate sale transactions is made as part of other revenues from business activities. The income from the sale of real estate should be taken into account, and then the initial value of the real estate less any depreciation write-offs should be subtracted from it. The value determined in this way should be multiplied by the appropriate rate in accordance with the general rules of 18 or 32%.
Finally, it is worth noting that if the entrepreneur has the possibility to change the qualification of the real estate used in business, it is worth considering, because the change of the purpose of the real estate may result in a reduction or even exemption from taxation of a given transaction of sale of the company's real estate.