16 January 2020

Property tax for entrepreneurs – new rates in 2020

The New Year brings further changes in Polish law. Entrepreneurs will have to prepare for updated higher property tax rates from the beginning of 2020. The maximum tax amount is directly related to the inflation rate recorded in the first quarter of 2019.

The property tax applies to land, buildings, structures or their parts associated with business activities.

The law on Local Taxes and Fees sets the rules for applying tax rates. According to the content, the upper limits of property tax rates fall under annual changes. They are determined according to the general price level of goods and services index (commonly inflation) published by the Statistics Poland for the first half of the last year (relatively to the year before the last). Therefore, tax rates in 2020 increased by 1.8 percent, since the general price level index in the first half of 2019 compared to the first half of 2018 equaled 101.8 (1.8 percent).

New rates for entrepreneurs

From 2020, the maximum tax rate on land equals 0,95 PLN, therefore it will increase by 0,02 PLN compared to the previous year. The maximum rate for buildings or their parts used in business activities will amount to 23,90 PLN per 1 m2 of the usable area – relative increase by 0,33 PLN per m2.

Entrepreneurs, as well as all owners of private residential properties, will also be affected by the tax increase for the use of residential properties (not intended for business purposes). The new rate for 2020 amounts to 0,81 PLN per 1 m2.

Ad valorem tax in Poland?

Experts speculate about the possible legislative introduction of the ad valorem tax calculation method that would replace the current property tax. Its implementation would considerably affect rates because the ad valorem rates are based on different factors. Instead of the usable area, the amounts are calculated according to the market value of the land or property in question.

This means a significant increase in maximum tax rates, especially for real estate whose estimated market value exceeds significantly their value based on the usable area (small apartments located in city centers or next to the important transportation hubs).

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ARPI Accounting is a part of ARPI Group, a Norwegian holding which started to operate in Poland in 2001.