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Avoiding tax when selling a flat in PL


Juche  
14 Sep 2009 /  #1
What is the deal regarding capital gains tax (or whatever they call it) in Poland? Supposedly you dont need to pay after so many years of ownership....what is the time period and are there any other ways of avoiding this rip off??
rkb  
15 Sep 2009 /  #2
It depends when you bought your flat.

I bought my flat in 2006 & will have to wait 5 full years after the end of 2006. Unfortunately the law changed at the end of 2006 & if you bought your flat in 2007 or later then to my knowledge there is no way of escaping the tax.

I might be wrong though so if anyone knows differently then I'd be just as interested in knowing
OP Juche  
15 Sep 2009 /  #3
this concerns a flat bought in 2006, and waiting until 2011 is not an option, unfortunately. Doesnt seem fair what with us not having multiple properties for sale or anything...

my leader is especially curious if there are any exemptions if the property was bought with bank financing for it does not seem fair to tax someone 10% on the value of the property if the bank owns 80 percent of it....
inkrakow  
15 Sep 2009 /  #4
It's a capital gain tax - ie it's applied to the profit made. You keep that, not the bank!

If you bought before 1.1.2007 and sell within 5 years of buying it, you pay 10% of the profit.
misskend  
15 Sep 2009 /  #5
Capital gains is a fair tax, if you are selling and you have to pay it then you have made a profit, its a good situation to be in. That profit was made on the strength of the good economic situation which all the people in poland are responsible for and should gain from. Capital gains tax is 21 plus % IN ireland and in the UK can be almost 40%(not exact about this) on an investment property. you are liable for income tax on the capital gains too but will be liable for that in your country of residence.

The setup first day was when you should have considered all this and weighed up the pros and cons of setting up a sp.zoo to own the property, that way you can offset costs in the company against the capital gains. You could have paid yourself a consultancy fee through the company and made the profit look minimal. However you would still be liable for incometax on the profit. Income tax is a little easier to avoid than capital gains.

I think capital gains is fair enough, you have made money, good for you, in Poland and the state of Poland is entitled to a slice.

Grin and bear it!!! or plan better from the start, people are funny they think that lawyers and tax consultants are expensive at the beginning and then in the end they pay more capital gains and income tax and wish they had got the professional advice from the start.

PLANNING IS KEY AT ALL TIMES - Get quality professional advice and the start and save money in the end.
Wroclaw Boy  
15 Sep 2009 /  #6
Supposedly you dont need to pay after so many years of ownership....what is the time period and are there any other ways of avoiding this rip off??

You can always reinvest the same amount within two years and flip it to the next property.
SeanBM  
15 Sep 2009 /  #7
If you bought before 1.1.2007 and sell within 5 years of buying it, you pay 10% of the profit.

Yes.

And if you reinvest that profit into something in Poland, within two years, you will not have to pay capital gains tax on that sale.

Just remember if you do this, you will have to notify the Polish Tax authorities.

Edit* Wroclaw Boy said it first, I must be getting slow on the draw in my old age ;)
cymru  
15 Sep 2009 /  #8
I think that if you have lived in the flat for more than 12 months you are exempt from CGT. However I am no tax expert.

As for est a sp. zoo, yes there are tax advantages, but you would find it hard to get a mortgage if it is only for one property and no other business activity, plus there are quite onerous accounting regulations on such a company. Of course if you were to sell/liquidate the sp zoo you would be liable for CGT, so not sure there is a huge advantage in this outside of the rental income aspect.
SeanBM  
15 Sep 2009 /  #9
I think that if you have lived in the flat for more than 12 months you are exempt from CGT.

I believe that is in England not in Poland.
Wroclaw Boy  
15 Sep 2009 /  #10
I think that if you have lived in the flat for more than 12 months you are exempt from CGT. However I am no tax expert.

i was going to say that also, if youre based there and its your primary residence for 12 months or more your exempt. or have they changed it again....?
SeanBM  
15 Sep 2009 /  #11
or have they changed it again....?

Maybe, I don't know.
misskend  
15 Sep 2009 /  #12
If you use the property as the setup capital of the company you have an easier ride with the banks - but as I said you need to weigh up the costs - do the maths beforehand - this is strictly for investment and not advised for owning your home, once the property is used as the setup capital the banks can take it much easier, which is why they will lend easier. If you intend to flip and to keep reinvesting the sp.zoo is a better option and can allow you to offset alot of costs.

Again research needs to be done.

For real Tax planning offshore is way forward, however I don't know if I am morally in favor of it, I do know how to do it and enjoy finding a way to avoid such issues, i.e prove that it can be done, and it can be done legally and its what every multinational does, they are loyal to no nation to profit alone and to be honest I think thats what has the world as messed up as it is at the moment. Profit should not be peoples only goal. Off shore is costly and means living on the edge all the time. I think that paying tax is only fair and everyone should be loyal to their nation or what nation they want to live in. Give a bit back rather than take all the time.
nierozumiem  
15 Sep 2009 /  #13
It's a capital gain tax - ie it's applied to the profit made. You keep that, not the bank!

No. Properties purchased prior to 1.1.2007 incur a 10% flat tax on the net proceeds of the sale (sale price minus estate agent fees etc). This is a tax based on the sale price and does not take into account any profit or loss. After five FULL calendar years of ownership there is no tax to pay on the sale. So if you purchased your flat in 2006 you cannot escape the tax until 1.1.2012

It is a very strange tax and not truly a CGT. For example if you paid 500,000PLN in 2006 and sold today for 600,000PLN your tax is 60,000PLN. If you sold today for 400,000PLN your tax is 40,000PLN, on top of your loss of 100,000PLN. OUCH!!

It is possible to avoid the tax if you roll the proceeds of the sale into another property within 2 years, but you must elect this option with the tax office very shortly after the sale (I think within 15 days)

Properties purchased post 1.1.2007 there is a true CGT of 19% on the profit. You can avoid this by using the property as your primary residence for 12 months; you must have zameldowanie as proof of this residence. And I think (I could be wrong) that after 1.1.2008 the rule changed to 24 months of residence to avoid the CGT.
OP Juche  
15 Sep 2009 /  #14
It is possible to avoid the tax if you roll the proceeds of the sale into another property within 2 years, but you must elect this option with the tax office very shortly after the sale (I think

so I have heard of certain exemptions, including one where people who owe money to the bank on the flat are exempt. can anyone confirm this? It seems stupid that someone who owes 70% of the value to the bank be whacked with a tax on the entire value of the flat...I mean Juche Christ if this is true (for people who bought before 2007) then it means you pretty much lose money no matter what, unless I understand this all wrong.
misskend  
15 Sep 2009 /  #15
Capital gains is on profit, gain on the capital input - of course your loan is taken into consideration - talk with the notary who is handling the sale and they will clarify everything.
nierozumiem  
15 Sep 2009 /  #16
Sorry Juche, but I haven't heard of this exemption, and I am a bit skeptical that such an exemption would be created. Certainly just about everyone that has purchased a flat in the 2004 - 2007 period would have used credit and would be in a similar situation as you.

then it means you pretty much lose money no matter what, unless I understand this all wrong.

No not the case at all. To use my previous example if you paid 500k and sell for 600K then you have a tax of 60k, and you net 40k. If you are selling for less than 10% greater than your original purchase then yes, you are losing money, and this may well be the case for most purchases made in 2006.

I agree that it is a bad law and has left many in a tough situation. That is probably why it changed in 2007. I recall that during this period, and still to this day, that many in property game kept refering to it as a Capital Gains Tax of 10%, which it is not. It would be more proper to call it a sales tax of 10%.

On 1.1.2010 properties purchased in 2004 will complete the 5 year period and I suspect that many properties will come on to the market from sellers very anxious to exit. Even more so on 1.1.2011 and 1.1.2012

Good luck with your sale. Get in touch with a good accountant or even call the tax office directly. Hopefully I am wrong in everything I have written...
OP Juche  
15 Sep 2009 /  #17
I agree that it is a bad law and has left many in a tough situation. That is probably why it changed in 2007.

what is a mystery is why these dingbat politicians couldnt wipe the slate clean and just rewrite everything instead of the usual "OK from now on, if you did this you pay that, bu only from so and so date, and if you..." Jesus they are all either high or stupid.

In the interest of closing this thread, it seems that yes you can include paying off the mortgage in the category "investment in home within two years" unless you have taken advantage of a previous interest relief program. So we are in the clear.
nierozumiem  
17 Sep 2009 /  #18
Juche, Can you explain this in more detail? I am very interested to know how this works. Thanks
OP Juche  
17 Sep 2009 /  #19
a lady at the Urzad Skarbowy told me that in order not to pay the 10% tax you have to submit to them a statement saying that the money from the sale will be used for "other home improvement or purchase." In other words reinvesting in housing. She said that paying off a mortgage qualifies under this category, as long as you have not taken part in a previous loan interest payment program (I think there was some program a while back where the govt would pay off your interest on a home loan)...obvioously u would want to ask around some more and confirm this, but I seemed to have heard it from the horses mouth...

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