MDDP
Senatorska 18a
00-082 Warsaw
tel. (+48) 22 322 68 88
biuro@mddp.pl
BARTOSZ BOGDANSKI
Partner | Tax Advisor
Email: bartosz.bogdanski@mddp.pl
Mob.: +48 660 440 140
IWANNA PAJĄCZKOWSKA
Manager | Tax Advisor
Email: iwanna.pajaczkowska@mddp.pl
Mob.: +48 503 974 625
author of the study
Introduction
The civil law transaction tax (PCC) is one of the taxes supplementing the tax system in Poland and is generally imposed on activities related to non-professional trade. In some cases, however, it burdens business activity and is most often applied in situations where the regulations provide for VAT exemptions.
From the perspective of entrepreneurs, including foreign investors such as entrepreneurs from Ukraine, it is important to understand the principles of its application and situations in which this tax may have an impact on running a business, in particular what impact it may have on transaction costs.
Below we will discuss key issues related to the PCC tax, its application, and look at how it may affect transactions carried out by foreign investors.
What is civil law transaction tax (PCC)?
The PCC tax is imposed on certain legal transactions that are expressly indicated in the Polish Act on the Tax on Civil Law Transactions. Such transactions include, among others:
- Sales contracts things and property rights, including real estate;
- Loan Agreements;
- Establishment of a mortgage;
- Establishment of paid use, including irregular and paid easements;
- Irregular Deposit Agreements;
- Company agreements.
In the case of foreign investors, especially from Ukraine, PCC tax becomes important in the context of acquiring real estate, shares in companies or concluding loan agreements outside the banking system. The key factor in this case is both the place of conclusion of the agreement and the location of the real estate or items that are the subject of the transaction.
Legal transactions are subject to PCC tax in Poland, provided that their subject is:
- things or property rights located or performed in the territory of Poland;
- items located abroad or property rights exercised abroad, in the event that the purchaser has his place of residence or registered office in Poland and the civil law act was performed in Poland.
In the case of a company agreement and its exchange, it is subject to PCC tax if at the time of performing the act the following persons are located in the territory of Poland:
- in the case of a partnership – the registered office of that partnership;
- in the case of a capital company – the actual centre of management or the registered office of that company (if its actual centre of management is not located in the territory of another Member State).
What is important, PCC tax does not apply to transactions subject to VAT, which means that, as a rule, commercial transactions in professional trade may be excluded from its scope if they are subject to VAT. This applies in particular to the acquisition of real estate in Poland, in a situation where the sale of real estate is subject to VAT (both in the case of applying VAT at the rate of 23% and 8%)
When and who pays PCC tax?
The PCC taxpayers are individuals, legal entities and organizational units without legal personality that are parties to civil law transactions subject to taxation. The basic principle is that the tax is paid by the acquiring party – e.g. the buyer in a real estate sales agreement, the donee in the case of a donation, or the borrower in a loan agreement.
It is worth emphasizing that, as a rule, the tax obligation in PCC arises at the moment of performing a legal act (e.g. at the moment of concluding a contract). From that moment, the tax must be paid within 14 days to the tax office without a summons. The PCC-3 declaration must be filed within the same period.
In the case of certain activities, such as concluding a sales contract in the form of a notarial deed, the tax will be collected by the notary, who will then forward it to the tax office.
PCC tax rates
The rates of tax on civil law transactions depend on the type of transaction. The current rates are, for example:
- 2% – including in contracts for the sale of real estate, movable property, perpetual usufruct and cooperative rights to a residential premises;
- 1% – from the sale of other property rights, e.g. shares in companies;
- 0,5% – from the loan agreement or partnership agreement;
It should be remembered that failure to pay this tax in the case of loan agreements may result in the application of a penalty rate of 20% PCC in the event that the parties invoke this agreement.
Investors should also remember that in some situations, especially when purchasing a larger number of residential properties, higher PCC tax rates may apply. When purchasing the sixth and subsequent residential premises built on one plot of land, the tax rate is 6%. This is important for entrepreneurs who plan to invest in the real estate market in Poland.
Summary
The Civil Law Transaction Tax (PCC) is a tax that may be imposed on foreign investors planning to conduct business in Poland and, for this purpose, planning to establish a company, buy real estate or take out a loan outside the banking system. It is crucial to understand which transactions are taxed with PCC, what tax obligations result from the conclusion of the agreement and what tax rates apply to individual transactions.
If you have any doubts regarding PCC settlements, it is worth seeking advice from tax specialists to ensure that all transactions are correctly taxed and that obligations towards tax authorities have been met.