VAT treatment of real estate in Poland – applicable rates and practical challenges

VAT rates and exemptions

The standard 23% VAT rate applies, among other cases, to the supply of building land and commercial properties, unless the conditions for an exemption are met.

The reduced 8% VAT rate applies, among other transactions, to residential properties covered by the social housing programme. The applicable usable floor area limits are 300 m² for single-family houses and 150 m² for residential apartments.

Under Article 43(1)(10) of the Polish VAT Act, the supply of buildings may qualify for a VAT exemption if at least two years have elapsed since their first occupation. However, applying the exemption may trigger an obligation to make a one-off adjustment of previously deducted input VAT for the remaining part of the 10-year adjustment period.

Sale of land – when does VAT apply?

Particular challenges arise when land is sold by individuals who are not formally registered as business operators.

Under Article 15(2) of the Polish VAT Act, the key issue is whether the seller is merely managing private assets or undertaking activities characteristic of professional real estate trading.

This issue was addressed in an application for an individual tax ruling prepared by NTAX. The ruling was issued by the Director of the Polish National Tax Information Office on 23 January 2025 (reference 0111-KDIB3-3.4012.549.2024.3.EP).

The case concerned the sale of land to a property developer. Although the properties formed part of the seller's private assets, the seller had undertaken several activities including: subdividing the plots, applying for changes in land use, relocating a drainage ditch, and conducting joint marketing activities.

The tax authority confirmed the position presented by NTAX, concluding that the overall scope of these activities went beyond the ordinary management of private assets. Consequently, the seller was considered a VAT taxpayer, and the supply of building land was subject to VAT without eligibility for the exemptions examined.

This conclusion is consistent with the case law of the Court of Justice of the European Union (Joined Cases C-180/10 and C-181/10), clarifying that activities comparable to those undertaken by professional traders may constitute economic activity for VAT purposes.

In the case of land transactions, the key consideration is whether the sale represents the disposal of private assets or an economic activity subject to VAT.

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Anita Tulak is a graduate of the Faculty of Law and Administration and a tax advisor at the National Chamber of Tax Advisors. She has passed through all levels of career in accounting and tax law, from assistant to partner of a law firm and worked for recognised private consulting firms and the “Big Four” company PwC.