Rental income from a Polish building is the straightforward part of the file. It is taxed in Poland under the immovable property article of any treaty, and no structure changes that. The difficulty arrives at the exit, when the owner sells shares rather than bricks and discovers that Poland has two separate answers to the question of whether a share is really land.
One sits in the domestic statute and applies a 50 per cent asset test. The other sits in the treaty with the Netherlands and applies a 75 per cent test measured over a full year. Between them lies a band of ordinary property holding companies where Poland has no treaty taxing right and yet the statute still puts a collection duty on the company whose shares are sold.
The domestic property clause
Article 3 paragraph 3 point 4 of the corporate income tax act treats as Polish source income the proceeds from a transfer of shares in a company, of the totality of rights and obligations in a partnership, or of participation titles in an investment fund, a collective investment institution or another legal person, and of rights of a similar nature, where at least 50 per cent of the assets of that entity consist, directly or indirectly, of immovable property situated in Poland or of rights to it. Receivables arising from holding those interests are caught on the same basis.
The measurement date is set by paragraph 4. Asset value is determined as at the last day of the month preceding the month in which the income arises, with a variant for listed issuers allowing reliance on balance sheet assets in periodic reports at the end of the last quarter before the quarter of the income. The test is a point in time test, and a temporary movement in the composition of the balance sheet on the wrong date can decide the answer.
Point 4a adds a second, parallel head of Polish source income: the transfer of interests of the same kinds in a real estate company. That term is defined, and the definition is where the practical work begins.
What counts as a real estate company
Article 4a point 35 defines a real estate company as an entity other than a natural person obliged to prepare a balance sheet under the accounting rules and meeting one of two tests. For entities commencing activity the test is applied on the first day of the tax year, or of the financial year where the entity is not itself a taxpayer: at least 50 per cent of the market value of the assets must have consisted, directly or indirectly, of the market value of Polish immovable property or rights to it, and the market value of that property must have exceeded 10,000,000 zloty.
For every other entity the test is applied on the last day of the year preceding the tax or financial year, using balance sheet values rather than market values, with the same 50 per cent proportion and the same 10,000,000 zloty floor. A third condition then applies: in the preceding year, revenues from lease, tenancy, leasing and similar contracts, from the transfer of ownership of such property or rights, and from holdings in other real estate companies, must have represented at least 60 per cent of total revenues.
The definition therefore excludes an operating business that happens to own its premises and captures the ordinary property holding vehicle. It also reaches indirect holdings, so an intermediate company between the investor and the Polish asset does not remove the entity below from the definition.
The company collects the seller’s tax
Article 26aa is the provision that surprises foreign sellers. Where interests in a real estate company are disposed of, the company itself must pay to the tax office, as remitter, an advance on the tax on that income at 19 per cent, by the twentieth day of the month following the month in which the income arose.
Two conditions must be met. The disposing party must be an entity without its seat or place of management in Poland, or an individual not resident there. And the transaction must concern shares carrying at least 5 per cent of the voting rights, rights carrying at least 5 per cent of the profit participation in a partnership, or at least 5 per cent of the participation titles.
Paragraph 2 prevents fragmentation. Where one entity makes more than one disposal within twelve months, counted from the last day of the month of the first, the advance falls due by the twentieth day of the month following that in which the aggregate reached 5 per cent. Paragraph 3 deals with the company that does not know the price: the advance is then 19 per cent of the market value of the interests disposed of. Paragraph 4 obliges the seller to transfer the amount to the company before the payment date, and the company to inform the seller of what it paid.
The representative and the penalty
Article 26c completes the machinery. A real estate company without its seat or place of management in Poland must appoint a tax representative under a written agreement identifying the parties and containing the representative’s declaration that it satisfies the statutory conditions. The representative performs the remitter obligations under article 26aa in the name and on behalf of the company, and is jointly and severally liable for the liability it settles.
Paragraph 6 contains the exclusion that matters to European structures: the requirement does not apply to real estate companies subject, in a European Union or European Economic Area state, to income tax on all of their income regardless of where it is earned. A Dutch company taxed on its worldwide income is outside the requirement on that basis, and a Polish resident company never enters it, because paragraph 1 attaches the duty only to companies without a seat or place of management in Poland.
Where the obligation applies and is not met, paragraph 7 provides for a monetary penalty of up to 1,000,000 zloty, imposed by decision of the head of the competent tax office. That figure is why the appointment is treated as a compliance item rather than a formality.
The annual disclosure
Article 27 paragraph 1e imposes a reporting duty on two groups. Real estate companies must report, and so must taxpayers holding, directly or indirectly, interests giving at least 5 per cent of the voting rights, of the profit participation in a partnership, or of the participation titles.
The report goes to the Head of the National Revenue Administration by the end of the third month following the end of the real estate company’s tax year, or of its financial year where it is not an income taxpayer. The company reports the identity of every entity holding interests, directly or indirectly, and the number of rights each holds; the holder reports the number it holds. Both report the position as at the last day of that year.
The obligation runs annually, whether or not any transaction has occurred, and it reaches indirect holders. A Dutch parent that has never filed anything in Poland can therefore have a Polish filing obligation of its own, and the ownership chain above a Polish property is disclosed before any sale is contemplated.
Where the treaty disagrees
The treaty with the Netherlands, as amended by the protocol of 29 October 2020, has its own property clause. Under article 13 paragraph 3a, gains from the alienation of shares or comparable interests may be taxed in the other state if, at any time during the 365 days preceding the alienation, those interests derived more than 75 per cent of their value, directly or indirectly, from immovable property situated there. Recognized pension funds are excepted.
Two differences follow immediately. The treaty threshold is more than 75 per cent, not at least 50 per cent, and the treaty test looks across a full year before the sale, which removes the point in time manipulation the domestic test invites but widens the period in which the condition can be met.
The band between the two tests is the practical problem. A company whose value is 60 per cent attributable to land satisfies the domestic definition but not the treaty condition, so Poland has no right to tax the Dutch seller’s gain. Article 26aa nonetheless contains no express carve out for cases where a treaty denies that right, and directs the company to pay the advance. The position has to be recovered rather than assumed, which means the treaty analysis belongs in the sale documentation and the funds flow.
The Dutch side of the same gain
On the Dutch side the gain falls under the participation exemption in article 13 of the corporate income tax act, which requires a holding of at least 5 per cent of the nominal paid up capital. The exemption covers the income from the participation and the result on disposal, and denies deduction of the costs of acquisition and disposal.
A property company is exactly the case where the exemption is queried, because the participation looks like an investment. The answer is in the asset test. Article 13 paragraph 12 defines what counts as free investments, and expressly excludes investments consisting of immovable property, including rights relating directly or indirectly to it, where those are not held by a body designated as an investment institution or an exempt investment institution. Real estate held outside those regimes is therefore not a low taxed free investment, and a Dutch holding of a Polish property company is not pushed out of the exemption merely because the underlying asset is land.
Where the exemption does not apply, the gain enters the ordinary base and meets the rates in article 22, which for 2026 are 19 per cent on the first 200,000 euro and 25.8 per cent above. The gap is wide enough that the analysis belongs before the acquisition structure is fixed.
Designing the chain
Three decisions follow, and each is taken at acquisition. The first is whether the exit is expected to be a share sale or an asset sale, because the property clause apparatus is irrelevant to the second. The second is where the shares sit, since the domestic test looks through intermediate holdings while the treaty test attaches to the treaty between the seller’s state and Poland.
The third is measurement. The domestic 50 per cent test is applied on a stated date, the real estate company definition on the first or last day of a year, and the treaty test across 365 days. Three clocks govern the same building, and a group that tracks one of them will answer the wrong question when the buyer’s counsel asks.
The recurring failure is to treat the Polish filings as administrative. The annual report under article 27 paragraph 1e tells the administration who sits above the property long before any transaction, and the advance under article 26aa makes the target itself responsible for collecting a tax that is economically the seller’s. A structure that has not allocated those obligations in advance will allocate them in the middle of a sale, which is the most expensive moment to find them.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.