The amendment of the tax regulations, effective from 2022 as part of the so-called The Polish Deal, also applied to the principles of taxation of revenues from rental and lease revenues obtained outside of economic activity (the so-called private rental). A number of significant issues concerning rental income are presented in the following article.
Taxpayers who will earn income from private rentals in 2024 can still benefit from settling these incomes only on a lump sum basis. The lump sum on recorded revenue is the only permissible form of settling private rentals (preventing the deduction of costs, including the depreciation deductions) from 1 January 2023. The lump sum rates for income from this source have not changed. They are still 8.5% of income up to PLN 100,000 and 12.5% of the surplus over PLN 100,000. The obligation to pay the lump sum to the tax office, i.e. monthly or quarterly, also remains unchanged. However, it should be remembered that the lump sum payment method chosen in the tax year (i.e. monthly or quarterly) applies to all sources of income subject to lump sum tax, settled in the PIT-28 declaration.
The PIT-28 tax return with the settlement of income subject to lump sum tax must be submitted by the end of April of the calendar year following the year for which the tax return is submitted, e.g. the deadline for submitting the PIT-28 tax return for 2024 is 30 April 2025.
Settlement of joint rental income of spouses
Spouses who have joint property between them settle income from the rental of joint assets for tax purposes in half. However, they can submit a declaration to the tax office that only one of the spouses will settle this income. In the case of rental income taxed at a lump sum on recorded revenue, the spouses' declaration is submitted to the appropriate head of the tax office by the 20th day of the month following the month in which the first income from this source was received in the tax year, or by the end of the tax year if the first such income was achieved in December of the tax year. Currently, only one of the spouses can sign the above declaration. The choice of taxation of rental by one of the spouses is also valid in subsequent years, until the spouses resign from this method of settling rental income.
The income limit defining the appropriate lump sum tax rate for income from private rental has not changed. Up to PLN 100,000 of income in a given year, it is still taxed at an 8.5% rate, and the surplus above this limit is subject to a 12.5% rate. However, from 2023, spouses can take advantage of the preference when settling income from private rental, consisting in applying a higher lump sum tax rate, i.e. 12.5%, only after exceeding the limit of PLN 200,000 (until 2022 inclusive, the limit was PLN 100,000 for the sum of income of both spouses), regardless of whether they will settle this income separately or decide to tax it in its entirety by one of them.
Settlement of losses from private rental
Loss on private rental arising before 2023 and settled on general rules, can be settled under the same source of income (i.e. private rental), by deducting it from the income obtained from private rental settled as a lump sum on the PIT-28 form. The above solution is less favorable for the taxpayer than deducting the loss from the income settled on general rules, because the taxpayer will only save 8.5/12.5% of revenue, instead of 12/32% of this income. The method of settlement of the loss will remain unchanged, i.e. it will be possible to either settle the loss on a one-off basis in the amount not exceeding PLN 5 million or to settle it over five consecutive years, in the amount of up to 50% of the initial amount of loss in the given tax year (under the same source).
Rental as a part of a economic activity
Individuals running sole proprietorships in the field of renting apartments, in addition to the lump sum settlement, which is still available to entrepreneurs, can benefit from taxation according to the tax scale (12% - income not exceeding the first tax threshold, 32% - the second tax threshold relating to income above PLN 120,000) or a flat tax rate (19% regardless of the amount of income), i.e. forms of taxation that allow deduction of costs from the tax base. In 2024, similarly to 2023, entrepreneurs can no longer include depreciation write-offs for buildings and residential premises in their costs, unless a separate premises of a commercial nature are used in running the business. Such premises can still be depreciated for tax purposes.
PwC Commentary
The limitation of the choice of the form of taxation of private rental and the mandatory taxation of this revenue on a lump sum basis is important for people earning money from renting out real estate. It may prove disadvantageous for landlords incurring high costs related to the subject of the rental. In this situation, it will be reasonable to consider running a sole proprietorship in the scope of renting apartments. On the other hand, given the inability to include depreciation write-offs related to residential buildings and apartments in the cost base, for a taxpayer for whom these write-offs constitute a significant cost, this may be a decisive factor in remaining in private rental settled at a lump sum tax.
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