The amendment changing the tax regulations, effective from January 1, 2022 as part of the so-called The Polish Deal 1.0 (with the changes that entered into force on 1 July 2022, i.e. the Polish Deal 2.0) also applies 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 changes covered by the Polish Deal are presented in the following article.
Taxpayers who will obtain revenues from private rental in 2022 will be able to use the settlement of these revenues for the last time on general rules by submitting a tax return for 2022 (taking into account the progressive rates applicable in 2022, i.e. 12% / 32%. Also only by the end of 2022, they will be entitled to include in their cost basis depreciation write-offs of buildings and apartments (the possibility of including depreciation write-offs in costs applies only to owners of real estate purchased or built until the end of 2021) and the interest part of the mortgage loan. Additionally, settling the private rental in 2022 on general rules, there is no obligation to calculate and pay advances for income tax to the tax office during the year.
In addition to the settlement of private rental income on general rules, taxpayers also have the option of a lump sum in 2022. From January 1, 2023 lump sum will become an only possible option to settle private rental income (making it impossible to deduct costs, including depreciation write-offs). Lump sum rates for revenues from this title will not change. They will continue to amount to 8.5% of revenue up to the amount of PLN 100,000. PLN and 12.5% of the surplus over 100,000. PLN. The obligation to pay lump-sum advances to the tax office, i.e.: monthly or quarterly, also remains unchanged.
Taxpayers who in 2022 chose a lump sum as a form of settlement of their income from private rental (also applies to entrepreneurs settling business rental with lump sum) will have more time to submit annual tax declarations starting from the declaration submitted for 2022. Namely, the deadline for submitting declarations PIT-28 has been extended until the end of April of the calendar year following the year for which we submit the tax return (instead of the previous deadline until the end of February of the next calendar year).
Possibility to change the selected form of taxation
Taxpayers who chose the lump sum for their income from private rental in 2022 will be able to settle this income on general rules by submitting a PIT-36 form at the end of the year instead of PIT-28. On the other hand, entrepreneurs settling business rental with lump sum in 2022 will have two options to switch to the tax scale, i.e.:
- after the end of 2022 - by submitting the PIT-36 form instead of PIT-28 within the statutory deadline,
- during 2022 - by submitting a declaration of resignation from the lump sum for the period from July 1 to December 31, 2022, until August 22, 2022. In this case, the entrepreneur will be required to submit two tax returns for 2022, i.e. PIT-28 for the first half of the year and PIT-36 for the second half of the year. Submitting the declaration results in a change in the form of taxation for the following years, unless the entrepreneur chooses a different form of taxation.
Entrepreneurs who settle business rental for 2022 on a linear basis will be able to switch to the general rules by submitting the PIT-36 form for 2022 instead of PIT-36L.
The above solution does not work in the opposite way, i.e. if the taxpayer chose the general rules in 2022, he/she will not be able to switch to a lump sum or flat rate.
Settlement of losses from private rental
Losses on private rental arising before 2023 and settled on general principles, can be settled under the same source of income (i.e. private rental), by deducting the losses from the income obtained from private rental settled as a lump sum (starting from 2023) on the PIT-28 form. The above solution will be less favorable for the taxpayer than deducting the loss from the income settled on general terms, because the taxpayer will only save 8.5/12.5%, 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 given year’s initial amount of loss (from the same source).
Business rental
Sole traders in the field of apartment rental, apart from lump sum settlement, which is available to entrepreneurs from 2021, will still be able (in 2022 and in the following years) to apply 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 2022, like in the case of private rental, entrepreneurs will be able to include depreciation write-offs of buildings and apartments in their cost base (applies only to owners of real estate purchased or built by the end of 2021), however from 2023 this will no longer be possible, unless a separate business establishment will be used for running the business. It will still be possible to depreciate buildings and business establishments for tax purposes.
PwC Commentary
Limiting the choice of the form of private rental taxation and obligatory taxation of these revenues with a lump sum will be of much consequence to people earning on real estate rental. It may prove disadvantageous to landlords who bear high costs related to the subject of the lease. In this situation, in the field of apartment rental it will be reasonable to consider turning to sole tradesmanship. On the other hand, given the inability to include depreciation write-offs related to buildings and apartments in the cost base, for a taxpayer settling rental on general terms and for whom these write-offs constitute a significant cost, this may be a decisive factor in remaining in private rental settled at a flat rate.
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