Are you selling an apartment or commercial property? You have to take into account many formalities and, most likely, the tax on the sale of real estate. Check when such tax is charged and in what cases can it be avoided?
Sale of real estate as a taxable activity
The sale of real estate privately, i.e. in addition to running a business, is a civil law activity within the meaning of the applicable law and as such is subject to income tax. It is about a situation in which, for example, you sell an apartment to another person. Then, after receiving the payment for the real estate, part of the money must be returned to the tax office as a tribute. It's a property sale tax.
Basically, such a tax must be paid by every seller of flats or houses if the sale took place within 5 tax years from the date of purchase or inheritance of the property. After the indicated time has elapsed, the tax obligation is lifted, and you do not have to submit any declarations to the tax office to avoid paying the levy.
If the reverse situation occurs, i.e. the sale of the property takes place within 5 years, the tax on the sale of an apartment or house in the amount of 19%. it will be calculated on the income obtained from the sale of real estate and will have to be remitted to the tax office. However, there are some exemptions which, in such a situation, allow you to avoid the tax or significantly reduce its amount.
Polish law provides for the possibility for sellers of real estate to benefit from a housing allowance for non-payment of tax within 5 years from their purchase. You can avoid paying the tax to the tax office if you use the funds from the sale of real estate for the so-called own housing purposes. You have up to 3 tax years to spend them, and this period is counted from the end of the tax year in which the transaction took place. Own housing purposes may include:
- Purchase of another flat, house or building plot.
- Repayment of the loan taken out for the purchase of real estate with interest.
- Purchase of construction and renovation materials.
- Acquisition of a cooperative ownership right to a dwelling.
For housing purposes, you need to allocate the entire amount obtained from the sale of real estate in order not to pay tax at all to the tax office, and all expenses should be documented by invoices or contracts. If you do not spend all your money on the sale of real estate, you must pay income tax on the remaining amount, including interest.
Even if you intend to take advantage of the tax relief, in order not to pay tax on the sale of real estate, you must inform the tax office about the sale. For this purpose, you are required to submit an annual tax return on the PIT-39 form to the competent tax office.