Revolution in leases of residential real estate

Poland: Work is in progress in the Polish parliament on the law on companies investing in property leasing (i.e. the Polish equivalent of REIT).

A REIT (Real Estate Investment Trust) is generally an entity that invests directly or indirectly in real estate, makes profits on a long-term rental and enjoys special tax status. Each country in which REITs operate establishes its own regulations regarding the legal form of these entities, their rules of operation or applicable tax reliefs. According to the draft law, companies in Poland that invest in leasing real estate (REIT) will be able to become joint-stock companies whose main activity is renting residential real estate in Poland (including renting through subsidiaries). The draft law does not apply to commercial real estate.

The purpose of introducing REIT is to encourage both institutional and private investors to invest in the residential real estate market and increase the attractiveness of doing business there.

As an encouragement, the legislator predicts the following tax benefits:

– exemption for shareholders of PIT and CIT tax from dividend profits and other income from participation in REIT profits,

– introduction of an 8.5% CIT rate on REIT income from renting residential real estate,

– partial exemption from CIT of subsidiaries’ income from leasing and sale of residential real estate, i.e. in the part intended for payment of dividends to REIT and only if paid in a timely manner.

Another special feature of REIT is the requirement to annually distribute profit to the shareholders in the amount of at least 90% of the total value of rental income or income from the sale of real estate. As part of securing the proper functioning of these entities, the legislator has provided supervision by the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego).

The entry into force of the Act is scheduled for January 1, 2019.

 

Source: Draft Act on Real Estate Investment Trusts (no. 2855)

 

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