Notary fee - can it be a tax deductible cost?
A taxpayer selling an apartment or wanting to establish a commercial law company must use the services of a notary. When performing activities that require confirmation in the form of a notarial deed, the entrepreneur must take into account various types of fees, including notary tax, PCC tax or a fee for entry in the land and mortgage register. The notarial fee is the maximum remuneration of a notary. Where can I find the amount of its rates and can it constitute a tax cost? Check!
Notary tax - where to find and how to determine?
The amount of the maximum rates of notary fees is strictly defined in the Regulation of the Minister of Justice on the maximum rates of notary fees (hereinafter referred to as the Regulation).
Pursuant to § 2 of the ordinance, the value of the subject of the notarial act is the value provided by the party (s) to the transaction, taking into account the rules provided for in the Act on Inheritance and Donation Tax or in the Act on Tax on Civil Law Transactions. The basis for determining the maximum rate is set out in § 3 of the Regulation and is:
"In the case of an exchange contract - the highest value of the subject of the contract to be replaced;
for divisions - the total value of assets subject to the division;
when handing over land for perpetual usufruct - the value of the first fee, and in the absence of it - the capitalized value of the annual fee, pursuant to the provisions of the Act on inheritance and donation tax;
in the case of an annuity agreement under which the real estate is sold, the right of perpetual usufruct or cooperative ownership right to the premises - the value of these things or rights;
in auctions and tenders - the price of the item obtained as a result of an auction or tender;
in the case of prize draws - the value of the drawn prizes;
in the case of a lease (sub-lease) and rental (sublet) agreement - the value of recurring services for the period for which the contract was concluded, and in the case of an agreement concluded for an indefinite period - the value of services for a period of 10 years;
when mortgage priority resigns - the value of the subject of activity determined according to the forward position, and if the sum of the outgoing item is lower - according to the lower amount ”.
When determining the value of the subject of notarial activity, additional charges and discounts are not taken into account.
Is the notary fee tax-deductible?
Pursuant to Art. 22 sec. 1 of the PIT Act, tax deductible costs are the costs incurred in order to achieve revenues or to preserve or secure their source, with the exception of the costs listed in art. 23, i.e. the catalog of expenses that do not constitute tax costs. In art. 23 of the PIT Act, the costs related to notary fees are not mentioned, therefore, if they are related to obtaining revenues from activity, they may be included in tax costs.
Additionally, in accordance with Art. 22 sec. 6c in the event of sale:
real estate or parts thereof and an interest in real estate,
cooperative ownership right to a flat or business premises and the right to a single-family house in a housing cooperative,
or the right of perpetual usufruct of land
for tax deductible costs, subject to paragraph 6d (art. 22 of the PIT Act), the costs of acquisition or documented production costs of given items, increased by expenses incurred during their possession, which increased the value of the property and property rights, are considered.
The amount of expenses incurred while having given property rights and real estate is determined on the basis of VAT invoices within the meaning of the provisions on tax on goods and services and documents confirming that administrative fees have been incurred, which was directly specified in art. 22 sec. 6e of the PIT Act. This means that the taxpayer has the right to deduct expenses incurred for the purchase of real estate and property rights as tax deductible costs, which is usually specified in a notary agreement, therefore notary fees incurred in the purchase or sale of real estate also constitute tax deductible expenses.
This position was also adopted by the Director of the National Tax Information in the individual ruling of April 10, 2017, ref. No. 2461-IBPB-2-2.4511.63.2017.1.KK., In which we read that:
"(...) the definition of tax deductible costs due to the sale of real estate against payment is specified by the legislator by directly indicating that such costs are, inter alia, documented costs of purchasing this real estate and documented expenditures that increased the value of the property and property rights, made at the time of their possession. The cost of acquisition, as a rule, is determined by a notarial contract of sale, on the basis of which the taxpayer becomes the owner of the property. Therefore, the purchase cost will undoubtedly be the price paid by the buyer to the vendor for the property being the subject of the sale (...).
For the sale of a flat, the Applicant may include the following expenses as tax deductible costs:
the purchase price of a dwelling in accordance with the notarial deed (regardless of whether the purchase was financed with own funds or a loan),
costs related to the purchase of a dwelling, i.e .:
• tax on civil law transactions,
• remuneration as notary fee ”.
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Mr. Stefan has sold the flat he had previously rented. In connection with the sale, he incurred costs related to notary fees. Will the paid notary fee constitute a tax deductible cost for him?
Yes, as this fee was directly related to the generated income, it could be recognized as tax deductible costs.
Mr. Kazimierz provides apartment rental services. On May 5, 2020, he signed a notarial deed in connection with the purchase of a new apartment for rent, and therefore incurred notary fees. Will the notary fee incurred constitute a tax deductible cost in this case?
Yes, Mr. Kazimierz has the right to include the expenses incurred for the purchase of real estate in tax costs, therefore the paid notary fee will increase the initial value of the purchased real estate.
Summing up, the amount of the notary's remuneration in the form of the notary's fee is strictly defined by law. In addition, there are also no contraindications for the paid notary fee to be included in the taxpayer's corporate costs, if it is related to his business.