The real

The stateReal
Polish of real estate
Estate Guide
Edition 2016

Poland
The real state of real estate

Preface 1
Contents
Polish Real Estate Market 3
1.1. Office market 3
1.2. Retail market 11
1.3. Warehouse market 18
1.4. Residential market 23
1.5. Hotel market 28
1.6. Investment market 33
1.7. Key cities in Poland 42

Legal and tax aspects of investing in real estate 57
2.1. Legal background 58
2.2. Investment vehicles and structures 64
2.3. Real estate financing 74
2.4. Acquisition of real estate – asset deal and share deal 86
2.5. Development and construction 101
2.6. Operation and exploitation 111
2.7. Exiting the investment 119
2.8. Sale and lease back 120
2.9. Due diligence as part of the acquisition process 122

Accounting aspects of investing in the
Real Estate market 133
3.1. Polish accounting regulations 133
3.2. Selected Aspects of Accounting for Real Estate under
International Financial Reporting Standards 146
3.3. Selected IFRS issues and their implications for real estate
entities 164

Contact 173
Appendix 183

Preface

EY, a global leader in assurance, tax, transaction,
advisory and legal services prepared this guide to
the Polish real estate market. This guide aims to
provide its readers with a broad view of the market
and the current investment climate, as well as
legal and tax information, in a practical format to
help you make informed investment decisions. Our
combined expertise in this market has enabled us to
produce what we hope will become an indispensable
reference tool on the state of the Polish real estate
market.

In conjunction with the views contained in this
guide, it is important to seek current and detailed
information on the commercial climate at the time
of considering your investment, as this can change
at any time. This guide reflects information current
as of 1 January 2016 unless stated otherwise.

Poland. The real state of real estate | 1

The real state of real estate .1 2 | Poland.

showed a rapid increase in supply.1.2 million m2. in 2016 the in a more timely response to demand. Office market Poland – general the situation. the financial crisis temporarily affected Poland. On the experienced a boom in economic activity other hand. The second half of the decade 2013 amounted to nearly 670. The annual level of new supply in respond. Because of verified most of the investment processes. growing trend shall continue steady decline from the 1990s until 2005. in following years. The real state of real estate | 3 .000 m2. other regional business centers in the 1990s. annual supply remained below in terms of new supply. In 2015 total office stock The run up to 2009 showed a reversal of this in Poland amounted to 8. but taking pipeline into and towns in Poland. Kraków. which was substantially less than criteria implemented by banks after 2008 the rapidly increasing demand. highest yearly value recorded in Poland since initially addressing pent-up demand from 2000. decades of low supply. the difficult local development and financing Currently construction activity is recovering conditions. increasing interest in modern office an initial wave of new office construction accommodation even in smaller cities and starting in the financial and political capital towns.Polish Real Estate Market 1. The economic fundamentals. On the majority of Polish office – Warsaw. Although in Warsaw. Warsaw remains by far the largest office market in Poland and still Following major reforms in 1992. Tri–City and Wrocław. Generally.000 m2. supply was initially slow to quickly. Like other markets.000 m2. as Poland which represented significantly higher demonstrated its political stability and sound growth in comparison to previous years. Poland attracts major development activity. thus biggest construction activity will be observed stabilizing rents and vacancies. markets 2011 was one of the weakest years Until 1996. The rapid increases level of total completions in 2013 was the continued into the first part of this decade. As trend. The strict lending 50. rents were in consideration. but later resulting in New supply in 2015 amounted to an office oversupply in many major cities 643. with indications of a maturing office far as new projects under construction market where new buildings come to market and proposed are concerned. the have entered the path of strong economic modern office market began to emerge with growth.

360. At the end of first domestic companies. In addition. in which the Warsaw area played a date for modern office space.000 m2 and although companies.9 1 000 000 5. of the 1990s in response to the Polish political transition and economic reforms. This led to rapid half of 2013. when over major role.4 3 500 000 Rents in EUR/m2/month 15. consulting companies. the Polish capital completed between 1989 and 1997 to city has received a significant share of the 680. Supply followed by a growth period during recent The end of 1998 marked the first dramatic years. which in the period from 1990 non-central locations accounting for around until the first half of 1998 resulted in 98% 70%.5 5 500 000 .000 m2.3 13. stock rose to inflow of foreign capital. the course of one year the modern office Because of its central functions and supply doubled from the 300.000 m2 convenient location. Large foreign approximately 1.4 8. Warsaw has of modern office space in non-central traditionally been the most important locations exceeded central. The real state of real estate . the total modern office space growth of demand for modern office space in Warsaw has exceeded 4 million m2. Two years later. annual delivery in Poland.9 3 000 000 15 Supply m2 2 500 000 12.Polish Real Estate Market Office market in Poland 5 000 000 25 4 500 000 4 000 000 20 18. Warsaw remains the most mature 4 | Poland.8 2 000 000 10 10. With Warsaw as a location of their headquarters the exception of 2003. as marked the end of the central location’s well as international firms.6 1 500 000 6. and the trend administrative and business center for continued through 2013. including various financial 54% of this was in the city center. with in the city. 0 Warsaw Krakow TriCity Wroclaw Poznan Lodz Katowice Szczecin Lublin Supply Rents Vacancy rate Source: EY Focus on Warsaw to 100% occupancy rates as well as one of The modern office market in Warsaw the highest rental levels for office space started to develop rapidly at the beginning among European cities.2 10. 2001 institutions. usually choose dominance in new annual supply.

vacancy rate remained As the supply of new space reached stable at the level of 8%. In 2010. Poland. Wawelska. With stock of approximately 4. al. approximately helped vacancy rates rise as far as 20% in 8. the overall office stock in Warsaw can be divided into vacancy level in Warsaw has systematically two groups: central and non–central.3%. and non-central 2014. the vacancy rate exceeded 13%. central and non-central vacancy rates stood Grójecka. in the end of 2015. Towarowa.6 million m2 as for the crises came a reversal of this trend. the building boom from 2000 to 2002 However at the end of 2012. ul. the modern to non–central locations. the vacancy Starting from between 4 and 6% in 1998. Armii Ludowej. the market saw demand for office accommodation and vacancy rates rise to very high levels.9% respectively.7%. Due to growing and surpassed demand. new projects. with non-central locations falling rise within the next few years and older below the 10% mark (7% on average) in buildings will face difficulty to compete with 2004. limited completions in 2011. 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Non-central City center Vacancy rate Source: EY office market in Poland with a total office at the 3. fluctuated back and forth between 15 and It is expected that the vacancy level will 19%. Due to the significant the city center and 16% in the outskirts. Regardless of the proportion of central On the basis of location. when city center is bound by ul. In locations became the norm rather than the the end of 2015 the vacancy rate slightly exception. central and non-central locations decreased. The decreased from 2002 until 2007. Polish Real Estate Market Annual delivery of modern office space (m2) in Warsaw 350 000 18% 16% 300 000 14% 250 000 12% Supply m2 200 000 Vacancy rate 10% 150 000 8% 6% 100 000 4% 50 000 2% .8% was unoccupied.4% and 2. reaching the level of 12. ul. volume of new projects completed in As the market stabilized. The real state of real estate | 5 . 2008 and 2009 vacancies doubled to over 7% overall. rate in Warsaw fell and reached 6.

expected that Warsaw will strengthen its The year 2010 saw the completion of position in terms of new office supply over over 200.000 m2. In 2013 a record amount of new office Business Garden.000 m2. 360.000 PHN Domaniewska St. Solidarności. though the next years. Spektrum space is in office buildings located outside Tower. Cristal Park. Plac Unii and Q22. Włochy and Praga district. Skylight.000 m2 was added to supply and there most of the new office buildings were has been year-on-year growth since 2005. Similarly to previous years.Polish Real Estate Market the Vistula River and al. Marynarska space delivered to the market was observed Business Park. The this was planned well before the crisis and most significant office buildings located these projects had secured financing in within this area include: Rondo 1. In 2012 the market office locations include Mokotów. these locations. exceeding 300. Lumen. Platinium Business Park. Wiśniowy Business Park. Warsaw Trade delivered to the market. Warsaw Spire Complex. Source: EY 6 | Poland. Year 2014 brought Poleczki Business Park.000 Europa Capital (renovation) Twarda St.000 m2 were Center. Trinity Park. Oxygen Park and 280.000 m2 of new space. Metropolitan. Non–central of the city center. advance of now stricter lending criteria. The majority of Tower. Focus Filtrowa. amount of new office space remained at the similar level as in 2014 reaching nearly Yearly new stock peaked in 2000 when 280. Eurocentrum Office slight slowdown in new supply with nearly Complex. Ochota. Central Warsaw Spire C 20. which amounted to 270. Non-central Royal Wilanów 37. In 2015 the Lipowy Office Park warrant closer attention. witnessed a higher growth in new office Wola. situated in non-central locations. In supply.400 HB Reavis Postępu St.000 m2.000 m2 of new supply was added. Warsaw Financial In 2011 approximately 120. Non-central Domaniewska Office Hub 27. The real state of real estate . Non-central Postępu 14 34.000 Ghelamco Grzybowska St. There is when 120.000 m2 of new stock.000 Capital Park Klimczaka St. Major office developments completed in 2015 Name Location Area (m2) Developer Spectrum Tower Central 41.

Non-central Proximo 26.000 Ghelamco Wołoska Central Atrium 2 20. It • new entrants into the Polish market.000 m2 of modern office space The demand for modern office space comes will enter the Warsaw market in 2016. more Demand than 400. Source: EY According to project announcements.000 Prochem Park Łopuszańska St.000 Skanska Wronia Non-central HB Reavis/Xcity West Station I-II 68. is expected that some of these projects will particularly evident in 2004.000 Capital Park Complex II Jerozolimskie Ave.000 HB Reavis Center II Inflancka St. Gdański Business Non-central 50. Non-central Wołoska 24 21. However.000 Echo Investment Jana Pawła II Ave. as based in Poland and have participated in developers and their lenders take a more the rapid economic growth. Poland. mainly from: Around half of the planned space is located in the city center. that prediction • Polish and foreign companies who are is subject to a number of variables. Polish Real Estate Market Major office developments under construction Name Location Area (m2) Developer Central Generation Park 84. Eurocentrum Office Non-central 25. just after be delayed until such time when reasonable accession to the European Union and level of pre-leasing has been achieved.000 Skanska Rondo ONZ Prime Corporate Central 20. cautious approach to speculative projects. Astrum Business Non-central 30.000 Golub GetHouse Center Grzybowska St.000 Ghelamco Grzybowska / Towarowa St. The real state of real estate | 7 . Central Q22 53.400 Jerozolimskie Ave. again during 2007 and 2008. Investment Central Warsaw Spire A 60.400 Hines Przyokopowa St.

while in 2015 total office take- moderated to 525. or Along the classic supply and demand approximately 40% of the previous year’s model.Polish Real Estate Market Prime office rents & cumulative office supply 5 000 000 45 4 500 000 40 4 000 000 35 3 500 000 Rents in EUR/m2/month 30 3 000 000 25 Supply m2 2 500 000 20 2 000 000 15 1 500 000 1 000 000 10 500 000 5 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Supply Rent Source: EY • the new “Services and Information by tenants relocating either to improve Economy” accelerating the need for their accommodation or to reduce cost up–to–date office space. borders to foreign investment. declining market had emerged. In 2009 the total volume of leasing Rents transactions amounted to 210. with take–up leased. Due to the crisis in particular has benefited from Business 2008/2009 many tenants reduced their Process Offshoring (BPO). The real state of real estate . particularly for office space in the Warsaw city center.000 m2. demand has recovered. Take-up 612. space and were seeking to sublet the • state entities which are more and more excess. This situation changed in 2010. rents in the late 1980s and early volume. interested in leasing office space rather when.000 m2 showing by the end of that year symptoms of a 36% growth in compare to 2014. old and low environment and optimistic forecasts. with a market relegated to mainly 1990s escalated as Poland opened its small lease transactions. In 2013 record of amount of office space (633. demand is much less driven by limited. Poland in by optimizing space.000 m2. quality buildings. and supply of modern office space was extremely Currently.000 m2 in 2008 and up reached nearly 834. Demand for office space pushed business expansion and rather increasingly 8 | Poland. due to a more positive economic than occupying self-owned.000 m2.000 m2) were Growth surged in 2007. In 2014 demand dropped by 3% to reaching almost 500.

building The first building boom of the late 1990s standard. to 15/m2/month.50/ charge calculation is based on the pro m2/month. but paid in PLN as regulated by demanding clients helped raise the standard Polish law until 2009. difference can be accounted for by location alone. These rates generally vary the Euro has become Poland’s standard from EUR 3. air–conditioning. The real state of real estate | 9 . not all of the rents may increase. Since accession into the EU. that helped differentiate completion in 2016. As a result of modern city center offices typically 25% intense competition among landlords. cleaning. especially locations. pushed overall rents down.5 /m2/month. there signed well below asking rates. the to 30% higher than for new offices in out– difference between asking and effective of–town locations. resulting in both central and non- 15-25% lower than asking rents. Polish Real Estate Market rents to their peak in 1991 of USD 50/m2/ Current rents for prime office space located month for office space of relatively poor outside of the city center range from EUR 11 quality. This buildings are between EUR 19 and 23.town office parks and number of new projects scheduled for around 1996. rata share of common space used (lift. Today. As expected in a tough market. The late 1990s noticed rents for in the central locations. are added to net international clientele being denominated rents and calculated according to the in DM or USD. rents depend mainly on location. In the early years low • service charges including water. standard properties were priced in PLN. The following terms for modern office The second part of the boom in the early buildings are regarded as common features 21st century brought with it additional within a typical lease agreement: increases in supply and a further drop in • since the introduction of the EUR. HICP). new rental contracts are being With such limited supply available. electricity. on the basis of the consumer price index Currencies have also played a role in the in the Eurozone (MUICP. heating. Asking central locations having similar rent rates. but more EUR. However. leasing market. size and length of lease term. of central locations and two altogether • rents are subject to annual indexation separate markets emerged. most overall rent levels. but it was the Due to the growing development activity introduction of out-of. etc. high quality office added to the net office space. with higher standard properties geared for service. reference currency for leases. as non.5 to 5. Our sources was little segmentation in the Warsaw office suggest typical effective rents are roughly market.central locations were built for more price–conscious tenants ready to Standard lease terms accept a lower standard. rents • a charge for common space is usually for centrally located. Poland. area leased. it is expected that the prices between central and non-central rental rates may still decrease. This temporarily pushed new leases have been denominated in the gap between locations closer.

Such “add–on factors” • Incentives for tenants are currently generally vary from 5% to 10% of the a common practice and their range leased area. of the lease agreement. 1 month guarantee equal to 3-6 month rent. • leases range from 3 to 10 years. Typical lease incentives include: • landlords usually require tenants to provide a rental deposit or bank • rent–free period of approx. typical • fit-out allowance of approx. reception). toward longer leases for larger tenants and new developments. • in addition to rent and service charges. 10 | Poland. which depend mostly on the size of tenants are obliged to pay 23% Value the occupied premises and the term Added Tax (VAT).Polish Real Estate Market lobby. with a trend 150–200 per m2 of net office space. EUR contracts are 5 years. The real state of real estate . per 1 year of lease or more. is subject to individual negotiations.

Polish retail market has undergone substantial changes. The real state of real estate | 11 . This led to the arrival of international brand supermarkets including Billa. growing from a limited number of state– owned and small private enterprises at the beginning of the 1990s. occupiers focus changed from anchors and mass market brands that drive demand in medium and large-sized retail schemes. as well as the mix of retail tenants. Poland. In this context the ownership of shopping centers. Retail market Poland – General Over the last few years.2. However. investors and developers to move across national borders and access new or less competitive markets or to exploit market niches. Hit. It became easier for foreign shopping center operators. to smaller shopping centres. The early development of the retail market in Poland began in 1990s when supply grew to satisfy the demand for food. retail parks or convenience centres located in smaller urban areas. is becoming increasingly international.1. to strong sector that encompass an increasing number of international retail chains and quality local outlets.

than 70% of the total modern space is Hypernova. Katowice. Łódź.000 m2. Poznań. Jelenia Góra (Galeria Simply). Bricomarche). Media Markt. Kaufland and more projects are being opened and built Biedronka has been observed. Carrefour. Starogard Gdański Emperia Holding (Stokrotka.000 m2 of modern retail prepares new draft. (Stop. Currently. Radzionków (Cydr retail park) or Czerwionka Leszczyny The major hyper and supermarket chains in (Centrum Zakupów). concerning the retreat of Tesco chain from such as: Sochaczew and Jarocin Poland and three other Central European (Multishop). provided by shopping centres. Leszno (Galeria Goplana). Polish government began works (Łódź). Information in towns with less than 50. Hit.g. Piotr i Silesia. Alma.Shop). Billa).000 inhabitants. Moreover. Plus Discount. Auchan Group (Auchan. Géant. the total modern retail supply Poland has seen a rapid expansion of accounts for around 13 million m2. Real.Polish Real Estate Market Rema 1000 and Globi. some of the largest hypermarket Modern retail space completed in 2015 operators like Tesco or Carrefour have amounted to around 500. on a new large-surface shops tax. while retail Leclerc and Real. E. Tri-City. MILA. in which the shop space is under construction. by taxing shops with an (Jaworzno). The real state of real estate . Poznań. likely to continue to benefit from stronger after consultation with experts from domestic and investor interest. 12 | Poland. Sanok (Galeria Jeronimo Martins (Biedronka. Tesco. The retail market in Poland is area larger than 250 sqm. as more and by Lidl. included SuperSam (Katowice). Brodnica (Dekada). the government more than 560. ITM (Galeria Neptun). Lublin Carrefour. Retail market terms of sales revenues include: Metro AG continues to grow in smaller cities like (Makro Cash & Carry. Hebe).g. that Tarasy Zamkowe (Lublin).g. Nowy Rynek). Galeria Neptun would help small. and Stalowa Wola (Galeria (Intermarche. More major hypermarket chains such as Tesco. Zielone Arkady (Bydgoszcz). Leclerc. Świnoujście (Galeria Corso). Wrocław. VIVO!). Simultaneously. Żary countries remained unconfirmed. 15% projects being extensions. Sukcesja In 2015. and 3% respectively. Saturn). Hypernova. local shops compete with (Starogard Gdański) and Galeria Galena large trade entities. Netto. Oława (MyBox). which is been introducing new formats such as a 10% increase compared to last year. Currently. Kraków. Wrocław. (Tarasy Zamkowe). Łódź and and two Auchan hypermarkets). Bi1 replacing eight Real City. From 1996 on. domestic trade networks. Although the largest some were sold (e. Auchan. Leader share in the retail market is held by Warsaw Price. E.000 m2 Carrefour Express and Carrefour Market). some parks and outlet centers account for 27% supermarket chains retreated (e. 94% of which taxation is progressive and depends on the constitutes for shopping centers. Kaufland). with 10- turnover. investors have been seeking an expansion of discount stores represented opportunities in smaller cities. Moreover.Tri– Paweł. Schwarz Group (Lidl. new openings with space above 20. Major mini-hypermarkets and supermarkets (e. Milea). Real) and a few new followed by other main cities such as strong brands appeared (Aldi. Simply. Sanok). Sudecka. At the moment. Géant.

In Bydgoszcz.000 m2 to be cities has been observed for the last years. to the market in 2015 were extensions Galeria Sudecka (ex.g. ETC Gdańsk and Auchan. Park Szczecin. owners to introduce some changes: refresh The market for retail outlet centers has the interiors.000 m2. service points. Domoteka in half of the shopping malls in Poland was Warsaw). Castorama. Posnania (Poznań). Almost decoration brands (e. Galeria Bałtycka (16. operation in the surrounding areas of larger The main extensions completed in 2015 cities. Fashion House Outlet Centre and Ursus (Warsaw).Factory were extensions of Wola Park and Factory Outlet. Galeria Glogovia (Głogów) and shopping center (22. CK61 Galeria Aviator (Mielec).size retail projects and planned functions to decrease grocery retailing extension and remodeling of the existing as the basic demand driver. Apart from the are looking towards entertainment medium . Outlet centers that are currently in encourage new tenants. As in previous years. Shopping centers center Metropolitan Outlet Bydgoszcz is that are being remodeled at the moment planned to be opened in 2017. retail offer should for regular shopping centers. new retail format consisting modernization and / or types have also emerged. Wroclavia (Wrocław). include been developing rapidly over the last few new amenities. often located in the more convenient shopping. including extension of existing shopping malls has shopping centers with a choice of interior been observed on the market. Outlet Park Góra).000 m2). Leroy Merlin) and retail parks. constructed before 2004 which forces the Praktiker. The real state of real estate | 13 . upon availability of financing and tenant although an increasing number of projects demand for retail space. Bielany Outlet Center.000 m2). CH Ogrody (Elbląg). delivered in 2019). Oultet Szczecin and Outlet Białystok. Standard retail stock. rearrange existing and years. include Atrium Promenada (Warsaw) and Poland. Galeria Pomorska (Bydgoszcz). OBI. in 2015 trend Over the last few years. The largest works planned for the next Galeria Metropolia and Forum Gdańsk three years are the extensions of Janki (Gdańsk).000 m2) Developer’s activity in small and medium and Fort Wola (up to 55. are run by three chains . Outlet Białystok and Atrium in place of Galeria Glinka a new outlet Copernicus in Toruń. and a food centers) . adjust as well. Customers now look for quicker and exceeding 5. refurbish facades.small retail parks with an area not court. (20. The main schemes delivered Park Handlowy and Magnolia Park (Wrocław). the market is tending towards complementary functions still include the opening of “strip malls” (convenience gallery shops. and with this regional cities and constituting competition change of expectations. Polish Real Estate Market Major projects in the pipeline with openings three shopping centres in Gdańsk – Galeria planned in years 2016-2017 are Galeria Morena. The actual amount of space that will be Supermarkets or hypermarkets are still delivered to the market in 2016 will depend the preferred formula for anchor tenancy. CH Echo in Jelenia of Factory Ursus in Warsaw. DYI stores (Jula.

The real state of real estate . Klif. Złote Auchan Piaseczno (64. – small shopping center offering 5. In retail space per person. Wołomin (30. Phase II . Atrium Reduta and Atrium Targówek. Hala Koszyki (7. Stacja Pruszków (27. located in Wilanów district. Warsaw’s retail space adding 12. Ferio Wawer was opened.000 m2 of office space).6 m2 of total of retail area. The arrived on the Warsaw retail market and remaining retailers occupy mostly retail was finished in Q4 2015.6 million m2 of modern retail space in Warsaw. in early 90s: Park Handlowy Janki (ex IKEA Among shopping centers in the planning Janki).500 m2 of openings took place: Arkadia (one of the retail space and 13.000 m2). openings of Atrium Promenada. Galeria Mokotów and Blue City. M1 Galeria Wilanów (61. Polish large cities. shoes and accessories. which is offering 350 boutiques built before the 1990s.000 m2).500 m2 and the extension of Factory agglomeration exceeds 2. with the total leasable area of residential buildings or department stores 16. of manufacturers. That decade brought also are Galeria Północna (64.000 Singspiel Jerozolimskie Ave. Poland Phase II .1 million m2. Ursus added 6. Farbyka Marki. retailers and importers of First shopping centers in Warsaw opened clothing.500 m2).500 retail units. Ochota Phase I – 2004 Blue City 65. biggest shopping centers in Poland).000 Górczewska St.000 m2.200 m2 This equates to around 0.000 Unibail-Rodamco 2004 Jana Pawła II Ave.Polish Real Estate Market Focus on Warsaw In 2015 the extension of Wola Park added Total modern retail supply in Warsaw 17. Major shopping centers in Warsaw Name Location Area (m2) Owner Completion Śródmieście Arkadia 110.000 m2 to the supply of but only approximately 1. MODO Domy Mody is a new concept that despite the highest purchasing power. Currently there are 15 major shopping centers in Warsaw only.000 m2). Eight it could be considered “modern” retail months took Ghelamco to finish Plac Vogla space suitable for international occupiers.2015 14 | Poland. offering over 3.000 m2) and Nowa Tarasy.500 m2 of retail area . Galeria Legionowo Between 2000 and 2007 four major (10. It is a one-storey units situated on the ground floors of shop. Tesco (ex HIT) and KEN Center phase in Warsaw agglomeration there (ex E.2014 Wola Inter Ikea Center Phase I – 2002 Wola Park 77. Leclerc).000 m2). Among all of the November 2015. market remains one of the least saturated.

Foreign and Street is historical axis of the city linking domestic retailers have also established Plac Trzech Krzyży to the Old Town and a strong presence on the ground floor of important tourist destination. Chmielna Street is pedestrian walkway connecting High streets are located across the Nowy Świat and Marszałkowska which central quadrant of the city. Polish Real Estate Market Name Location Area (m2) Owner Completion Phase I – 1996 Atrium Praga Południe Atrium European Phase II – 1999 55. Another important high street in on the customers preferences. Also presence range EUR 70-95 EUR/m2/month. cafes. Plac Trzech Krzyży.000 Klepierre Group 2000 Mall Powsińska St. Warsaw is Marszałkowska. Their luxury brands.500 Unibail-Rodamco Phase II – 2002 Mokotów Wołoska St. Real Estate Phase III – 2005 Phase IV . stylish restaurants and potential show that they can grow strong.2016 AXA REIM JV Złote Śródmieście 65.000 Promenada Ostrobramska St. Nowy Świat of standard and accessibility. categories dominate the high streets The opening of the second metro line profile in Warsaw: café. Prime high street well represented category is fashion and rents for units of ca. Investors Phase I – 1999 Galeria Mokotów 62. Another Świat and Świętokrzyska. Units of luxury retailers is noticeable in some in central Warsaw vary heavily in terms high streets in Warsaw. Phase III -2013 Sadyba Best Sadyba 27. The real state of real estate | 15 . on the Pawła II Avenue to the north of the Atrium Poland. 100 m2 oscillate in financial service providers.000 CBRE Global 2007 Tarasy Złota St. is dominated by prime and has recovered and gained importance. restaurant and bar enhanced the attractiveness of Nowy operators and services providers. There are buildings facing Jerozolimskie Avenue and numerous restaurants and cafes located Marszałkowska Street. Source: EY In the recent years Warsaw high street retail other hand. extended towards to Mokotowska provided they are well-profiled and focused St. The section of Jana on the street. Two retail overflow with cafes and restaurants.

Trzech Krzyży) and Hala Koszyki Standard lease terms (Koszykowa Street) and the construction Standard lease terms for retail space of office buildings with retail component are similar to those in the office market. The development Brands that recently opened their first potential of the high streets has been stores in Poland include: Origins. Jerozolimskie). Paul. typically for an additional stable with no changes expected in the 10-year period.5 /m2/month.6%). month for hypermarkets. Ecco Leather Goods. (Sienna Towers. In the New developments that will add new coming years we can expect that retail retail space in the high street center market will be enriched by retailers such as of Warsaw include reconstruction and Forever 21. Tallinder or Dunkin’ Donuts. seeking new locations for their projects or Jacadi Paris. Dairy Queen. modernization of objects such as CEDET (Al. Larger units EUR 50–200/m2 for large units and lease for approximately EUR 15 to 16 | Poland. the typical lease length for retail and Astoria). Service charges for smaller space vary from EUR 5 to 9/m2/ Warsaw high street retail sector is month. location prefer 10-year lease agreements with and quality. Colin’s. Centrum Marszałkowska However. around EUR 5 to 8/m2/ ground floors of the major office buildings. Benihana or Kiabi (fashion). Over 2015 the rental level was extension options. Sportisimo. Anchor tenants usually mainly on the type of a facility. Courir. Decimas. locations may exceed EUR 120/m2/month. Fuddruckers. which represent the • fit-out allowance at the level of highest retail rents in Poland). expending existing locations. future. Major tenants are charged EUR 2 to benefiting from low vacancy level (1. 3. Small clusters of expensive shops average rents from EUR 9 to 12/m2/month are also found in hotel arcades and on the and even lower. with stores.Polish Real Estate Market Business Center has traditionally been 30/m2/month. Superdry. low saturation and the lack of retail space in shopping centers. Loake.000 m2 pay much less than others. Tarasy and Arkadia. space in modern shopping centers ranges Retail rent rates vary widely and depend from 5 to 10 years. Ethos office building (Pl. but also incentives such as: unit–size and type of merchandise. tenants have become more demanding Average rents for small units in modern and developers seeking attractive tenants shopping centers in Warsaw vary from EUR frequently offer not only lower rental rates 40 to 50/m2/month depending on location. The real state of real estate . Prime • rent free period ranging from units of 100–150 m2 are let at EUR 60 1–2 months for smaller shops and up to to 95/m2/month (including rents in Złote 6 months for larger units. Usually anchor store known as a shopping destination and today operators occupying units of more than still features a mix of moderately priced 1. The rates for retail units in prime With the increasing supply of retail space. noticed by developers who are now Dsquared2 Kids.

anchor tenants started agreements). compared to previous years.e. The real state of real estate | 17 . In 2015. Polish Real Estate Market up to EUR 600/m2 for anchor tenants On the mature retail markets. Polish retail market became more extended rent free periods or partially tenant-led. with minimum 10-year lease saturation rate. with high (i. turnover-based rents. to demand large fit-out contributions. Poland.

Zielona Góra. Poznań. but these are now mostly built-to-suit projects.9 million m2 of warehouse space. and currently includes over 9. the modern market can now be subdivided into seven regions. The real state of real estate . Bydgoszcz and Rzeszów.3. rendering some investments no longer feasible. Warehouse market Poland – General The modern warehouse market in Poland began its development in the early 1990s. 1. who were reducing speculative projects in order to focus on managing current stock. This continues to boost investor interest in alternative regions including Szczecin. One activity that has continued even through the crisis has been road and infrastructure construction. Logistics centers are located outside city limits and offering good access to major existing and planned highways. each of which has a well developed warehouse space. Toruń. Although initially centralized within the Warsaw metropolitan area. and Kraków. Central Poland (Łódź. Tri-City. Upper and Lower Silesia. Piotrków Trybunalski). In the recent years situation in the financial markets has dampened accessibility to financing while raising the cost of capital. This was evident in the “tightening” by warehouse developers. Lublin. 18 | Poland. These include: Warsaw.

Kraków. Ożarów Panattoni USA Mazowiecki. Stryków. Gliwice. SEGRO UK Warsaw. Toruń. Poznań. Lublin Poland. Garwolin. Gliwice. Bydgoszcz. Czeladź. Chorzów. In 2016 we predict to see on the 5. Piotrków Trybunalski. Łódź. The real state of real estate | 19 . Łódź. Despite the steady amount of process. Dąbrowa Górnicza. vacancy considered the sixth largest market in rates significantly decreased – from c.000 m2 of modern warehouse following years and will probably affect also space. This indicated that developers are slowly Bydgoszcz. Opole and Szczecin. Rzeszów. Ruda Śląska. Stryków. Poznań. the Tri-City region is new supply coming on the market. ProLogis USA Rawa Mazowiecka (under extension). Positive trend should continue in the 900. Gliwice Błonie. is slightly lower than the result from 2014 that enable quick start of the construction – 1. Warsaw. of which 68% is already leased. Robakowo. returning to partly speculative investments. Teresin. Gdańsk. Kraków. Nadarzyn. Szczecin Gdańsk. 2015 brought a developing infrastructure contributes to strong upturn to the market.6% in 2015. Toruń.000 m2 which Investors can find well-prepared land plots. Wrocław Gdańsk. Stryków. The most active warehouse developers in Poland Country Major locations Company of origin (existing and proposed) Bielsko-Biała.1 M m². Wrocław. Mysłowice. Warsaw. Łódź. USA Katowice. Gdańsk. where strongly After a few stable years. Region that is continually gaining on attractiveness is Tri-City. in 2015 amounted to 980. where the owner sells and then leases the estate back. Wrocław. Gliwice. Toruń. Polish Real Estate Market Currently under construction is ca. New supply the development of the warehouse market. Poznań. more transactions of “sale remain on stable level. Pruszków. Gliwice. Currently. Lublin. Tychy. Wrocław. Janki. Teresin. Błonie. regional markets such as Rzeszów. Sochaczew.5% in 2014 to 4. Poland. and leaseback”. Goodman Australia Sosnowiec. Poznań.a. Rents local markets. Święcice.

Targówek. Lublin (under construction). modern space. Ożarów 20% decrease in comparison to 2012. Służewiec. which was over the city center (e.g. Wrocław (under construction). properties located within a 15 km radius (Okęcie.274. The real state of real estate .000 m2 In 2013. this dominance has been zones: steadily eroding as developers push for a presence along the emerging motorways • zone I: approximately 656. Żerań). new Pruszków).000 m2 of warehouse in properties located 15 to 50 km from space was completed.000 m2 in outside the major cities. Stare Gnatowice White Star (formerly AIG/ USA Gliwice. Nadarzyn. supply in Warsaw in 2014 was significantly 20 | Poland. Ożarów Mazowiecki. around 78. Łódź. Pruszków. In Mazowiecki. Czeladź Company Metropol Group Poland Błonie.9 million m2 of electronics.Polish Real Estate Market Country Major locations Company of origin (existing and proposed) PointPark UK Mszczonów. Błonie. Piaseczno. Warsaw Source: EY Focus on Warsaw Although the Warsaw metropolitan area The Warsaw modern warehouse stock is continues to account for the largest single defined as properties within approximately share in the Polish market (30% of total 50 km of the city center and is split into two space in Poland). contrary to the whole Polish market. Poznań Properties Bieruń. Tychy. • zone II: approximately 2. Poznań. Stryków. Łódź (under MLP Group Israel construction). Pruszcz Gdański. cosmetics and II) is estimated at almost 2. Warsaw Lincoln) Biuro Inwestycji Kraków. The total modern warehouse space in the warehouse facilities in this zone host Warsaw Metropolitan Area (Zones I and mostly pharmaceuticals. Piaseczno. Poland Kapitałowych Sosnowiec Menard Doswell & USA Błonie. Teresin.

customs clearance and most projects located in zone II.800 Panattoni 2009 Ożarów Panattoni Park Pruszków 85.000 2006–2012 Błonie CA Immo Millenium Logistic 80.000 m2 of warehouse their tenants with full service. Apollo Rida / Żerań Park 52. Platan Park 53. delivered to the Warsaw warehouse market The majority of space leased in modern around 150. including space is under construction in Warsaw area. 38.000 1995–1997 Warsaw I Okęcie ProLogis ProLogis Park Warsaw.300 ProLogis 2006 Warsaw II Targówek Warsaw. Last year developers client focused built-to-suit projects.000 m2.000 1999–2000 Żerań Prologis Poland.000 ProLogis 1999–2008 ProLogis Park Teresin 159. companies.000 Brwinów MLP Group 2007-2014 Park Pruszków II /302.000 Panattoni Park Ożarów 67. packaging.000 Platan Group 1998–2001 Ursynów ProLogis Park Błonie Błonie 153. Examples of class A modern warehouse developments in Warsaw area Area (m2) Developer / Project Location [existing / Completion Owner proposed] WHITE STAR Diamond Business Piaseczno 57. Polish Real Estate Market lower than in previous year and amounted supply is hard to pin as developers move to to 38. Menard Doswell / 39. Future transportation. loading. which sub–let space and provide Currently about 200. The real state of real estate | 21 .000 ProLogis 2000–2005 Teresin ProLogis Park Warsaw.300 Panattoni 2007-2009 Pruszków Warsaw.000 (formerly AIG 2001-2007 Park Lincoln) Europolis Park Menard Doswell / Błonie 178.000 m2 which is almost 4 times distribution centers is let to logistics more than in 2014.

to approximately 344. thus. Apollo Rida/ 49. The most sought after unit sizes are 1. 2014. operators. with one In 2014 demand increased more than 150% month for each year of lease term being reaching amount of 863. Warsaw big box rents stay on the stable level and for 2015 are currently quoted at the following levels: 22 | Poland.000 – 3. 31.2/m2/month.0 to 3.7% comparing to the 7% in tenants needs.7 to 1.000 m2 – paid in advance and adjusted annually on 70% of the area was leased in Zone II. Areas larger than modern warehouse and production facilities 10. usually leased in office/ Characteristic for Warsaw industrial market warehouse facilities of above 10. the basis of actual costs varies from EUR 0. the demand in 2015 property tax and security.000 m2 and decreased c.000 m2. Incentives have also moderated. The real state of real estate . A fixed amount dropped by 22% to around 670. is a large presence of class B buildings. Compared to 2014.000 m2 – the a general benchmark. maintenance. highest score in Poland.2/m2/month. First located in logistics parks.239 Hines 2007-2014 Annopol Annopol Source: EY In 2013 the demand for leasable • zone I: EUR 3.900 2005–2011 Park Warsaw Żerań Żerań SEGRO Distribution Park Warsaw.Polish Real Estate Market Area (m2) Developer / Project Location [existing / Completion Owner proposed] SEGRO Business Warsaw. In addition to rent. warehouse space in Warsaw area amounted • zone II: EUR 2. tenants are obliged to pay service charges for property management.000 m2. over the years they aged and now are being slowly replaced by newer designs better Vacancy rates in Warsaw have decreased adapted to the changing and growing to the level of 6.000 m2 are usually leased by logistics were built in Poland in the early 90s.a.8 to 5. 23% as compared to 2012.0/m2/month.

what seemed not easy to be repeated. Huge appetite for residential plots was observed and the trend continues. developers launched a big number of new projects. which was over 25. according to the Central Statistical Office. Poznań. With 2014 being so very positive for developers. Wrocław.1. Tri-City and Łódź) sold nearly 52. The real state of real estate | 23 . 2015 was another record breaking year on the Polish primary residential market.7% more new units (62. Encouraged by great sale results and strong demand. Kraków. The stock of new units for sale on the biggest Poland. This showed a 24% increase over previous year and 10% over the record 2007.5% more comparing to the previous year.000 new units and that was twice as high as the record 2007 or 2013.248 building permits. During 2015 throughout the country construction of 86. Developers on the top Polish markets (Warsaw. the 2015 sales level was over 20% higher.4. Residential market Poland – current overview 2015 was another year of record developers’ activity.498 new housing units was commenced – the highest number of new projects in history. Developers delivered 5. The number of new flats launched to the market was close to the one of the 2007 boom and what is very important almost same as the number of new units sold.448) as compared to 2014 and obtained 97.

on one hand (Piaseczno) and Gdańsk. with another 1. triggered by the EU accession specific type of apartments fulfilling MdM and resulting inflow of investors. Implemented in owners while in EU countries most of people 2014. in Poland At the same time. It will continue to have One of the turning points determining impact also in following years – until 2018. security buyers. wide offer of new flats. Since 2010 stricter in the following years: 15% in 2016 prices remain stable. This. This increased the number mortgage financing development as well as of applications for mortgage subsidies and positive demographic trends observed in big purchase transactions. The market. price growth. However the program was introduced in the beginning of 2014 but due to changes has Poland . in 2015 a state ‘House for over 75% housing stock belongs to private rent’ program was operating. in 2015 the fund contracted a 2. especially in the last cities. This housing. made mortgage loans more accessible on the other encouraged investment Stable prices.400 rent flats. The private rental sector remains 24 | Poland. demand still relies on affordability. Currently the available flats are that year. A following strong factor was the of matured developers’ market as well as government co-financing program ‘Housing good economy indicators were main factors for the Young” (“Mieszkanie dla Młodych”). 2007 marked another turning According to regulations of the Polish point. and 20% in 2017. Since January 2015 the maximum available Despite the continuing need for adequate LTV level for mortgages was 90%.fundamentals major impact especially in last quarter of 2015. Moderation in late 2007 led to Financial Supervision Authority (KNF) the stagnation in 2008.Polish Real Estate Market Polish residential markets at the end of 2015 apartments. influencing demand throughout 2015. been rented. means that buyers were required to come and to cap off a few good years of strong up with at least 10% own contribution. which ultimately gave own contribution regime will become even way to price decreases in 2009. Since September 2015 the program In the last two decades Polish residential was altered to cover also the secondary market growth has been driven by the market and became more available for overall growth of the country’s economy. it is worth to point out that there are boom reshaped the state of the residential significant disproportions regarding set price market. mortgage program parameters are available on the financing release and low interest rates. pumping up the prices of housing limits within the cities. and of residential land. which had a cumulative impact the fund. Warsaw agglomeration historically lowest level. Although more 2004-2007. months of 2015. What is very unique in Europe. the market shape was the boom period of when the program expires.000 units. The real state of real estate .071 already purchased and 949 were in the process of The market was influenced by a number finalizing investment purchase decision by of factors. Interest rates remained on located in Poznań. of which 380 have already has reached the level of nearly 49. larger families.

7% reaching level Poland. The fund plan to rent fully a few months up to even a year. Katowice. resulting in the dominance of of 168. The real state of real estate | 25 .710 units have been delivered in Focus on Warsaw 2015 (3. According to data market.731 Warsaw’s residential market remains (54%) were constructed by individuals the most developed in Poland: demand and 62. inhabitant and per average residential In 2014 appeared new initiative on Polish unit. Wrocław. over 147. Employment and education Poland was 188.3%) by developers.822. it still lags behind western EU According to official statistics in Poland less members in terms of quality. Polish Real Estate Market hard to estimate due to the fact that a The Polish residential market is presently large amount of rental agreements are the largest in Central and Eastern Europe. building permit can be applied for. Poznań.403. however. inhabitants. out of which 79. the remaining supply was delivered by housing highest income level in Poland and the cooperatives and municipalities. are below the European average. multifamily developments on the Warsaw Poland. Kraków. usable floor area per one Institutional rental market hardly exists.2% more compared to the same period of 2014).448 (42. such as – and is developing – mainly in largest number of residential units per 1. Target markets are: zoning plan results in a time-consuming Warsaw. lack of projects for rent. age of stock than 5 out of 100 persons rent a flat. administrative procedure. There was a also popular location for shared services significant – over 20. which takes from Łódź. In each single case. not adopted it is necessary to obtain zoning Planned investment scale is 5bn PLN and decision (Warunki Zabudowy) before the aim to build ca 20. Comparing to 2014 possibilities in Warsaw are a magnet also total number of constructions started for young people from other regions of in 2015 increased at 13. covering below 30% of buying standing assets and development country’s area. market is dominated by private investors Moreover. This commercial project standard.5% increase of building and office market which influence permits issued in 2015 which for whole demand. Warsaw is share remains marginal. TriCity. published by the Central Statistical Office. student housing and senior housing. Assuming equipped flats on rental rate lower 20%-30% that local spatial development plan was comparing to regular market rental rate. of institutional rental by BGK (Bank A major obstacle constraining housing Gospodarstwa Krajowego) aims to increase supply in Poland is mainly administration- market share of apartments for rent driven and consists of the limited number available on attractive prices. statistical indicators.000 flats to let.The fund is of zoning plans. Current In Poland mainly developers deliver flats trends observed are developing rental in multifamily buildings.000 cities. not officially registered to avoid taxation. The is driven mainly by in-migration. university cities and resort towns. Rental and level of market saturation. whose lowest unemployment rate. residential market called Apartments Existing stock differs in terms of quality and for Rent Fund.

000 Bank of Poland the average asking price and 15.Polish Real Estate Market residential market.400/m2) in 2009 constructions’ starts were starkly and the lowest in Białołęka district (below curtailed. the primary situation on Warsaw residential market. More than 10% of Polish offered over 18. demand dwellings released in January-April period. nearly 13. savings withdrawal and of demand and supply. Warsaw remains under 1%. number of completed new residential After the record year of 2001. 7. Apart from Śródmieście. respectively. demographic factors should support good According to market data.a.200 Nevertheless strong internal demand and apartments were completed. the Central Statistical Office. The real state of real estate . mainly influenced by a very high supply of Similar to the rest of the country. observed in Śródmieście (PLN 11. In the beginning of 2012 the remain Mokotów. on Warsaw market is on the upturn due to This was mainly driven by introduction of low interest rates and government support “Developers Act” in the end of April. According to the National units in Warsaw fluctuated between 10. However.000 units for sale. 12. The but there is a threat of a slow down after year 2013 showed a moderate developer’s mortgage financing regulations that will output: according to the data provided by be tightened gradually in following years. resulting mainly from low market and is also due to better alignment interest rates.482. market in Warsaw in the end of 2015 26 | Poland. Warsaw residential supply is provided on Warsaw remained the most expensive residential market.400 PLN/m2. resulting in the delivery of only PLN 6.family developments built in transaction price of approx.000 p.408 the most expensive districts in Warsaw in 2011.462 dwellings in 2010 and 9.049 and to 19. for PLN/m2. unit completions Warsaw is currently at the level of 7. This mainly concerns the secondary transactions. as well as large reinvestment. Following of apartments on the primary market in the boom period. The share of new housing units market with an average apartments’ in single.000/m2). Currently the Buyers pay on average 5-7% less than offer market is determined by rising volume of price. for several years. Ochota. completed investments. Ursynów and situation on the residential market was Żoliborz.800 increased to 19. The highest average prices were 2008 and 2009.

Poland. The real state of real estate | 27 .

rising popularity of Poland as a holiday destination as well as the development of medical tourism in Poland. According to data published by Central Statistical Office. Hotel market Hotel market in Poland is in a stage of rapid growth which is reflected by the increasing number of new hotels. 1. Chain hotels are also on average larger than independent ones which is connected with the minimum requirements of hotel 28 | Poland. growing number of tourists. the largest percentage of chain hotels in the category. The higher the category of a hotel. the share of chain hotels exceeds 50% in five-star category and is well below 10% in the case of one-star hotels. only 13% of the categorized hotels in Poland are chain hotels compared to the average level of 30% in Europe. The key drivers for the development of hospitality business in Poland are: economic growth. the number of categorized hotels in Poland exceeds 2. Another important factor influencing positively the development of the hotel market in Poland is the dynamic growth of BPO/SSC sector. The real state of real estate . as well as the growing interest in the Polish market from the international hotel brands. Currently. However.5.300 and is growing year-to-year.

most of them in the case of prime locations in major in regional cities. Best Western and Marriot international hotel chains that are Hotels & Resorts.2% of Warsaw takes the lead with 29% more hotel total number of tourists staying at hotels. Kraków is the city with the to the preceding year.7% and was 1. hotels and hotel rooms in main Polish cities. which is an increase of 10. Foreign tourists accounted for 26. less than in 2013. cities. The real state of real estate | 29 .2 p. rooms than Kraków. p. Hotels & Resorts.8% compared As it is seen . openings in Poland are: Orbis/Accor. p.1 p. Hilton Poland. However. Polish Real Estate Market chains regarding the business profitability. The share of Polish highest number of hotels. when guests using hotel infrastructure is rising. which is 1. Accor is Pure lease agreements are accepted only to open six Ibis Styles hotels. Secondary cities are cities and usually by hotel chains that are also targeted by: IHG (Dąbrowa Górnicza). 0 Krakow Warsaw Poznan Wroclaw Gdansk Lodz Kielce Torun Bydgoszcz Number of hotels Number of hotel rooms Source: EY based on GUS As far as operating models are concerned. expanding their operations on the A substantial share of future supply in the Polish market are mainly interested in coming years will be delivered in regional management or franchise agreements. The number of tourists staying at hotels The table below presents the number of in Poland in 2014 exceeded 16 million. Hotel chains Louvre Hotels (Nowy Targ) and Hilton that are the most active in terms of new (Jelenia Góra). are distributed across greater number of higher than in 2013 (Central Statistical rooms. looking at the number of hotel rooms. average hotel room occupancy in Poland In the case of larger hotels the fixed costs in 2014 equaled 42. The Number of hotels and hotel rooms in main cities in Poland 140 14 000 120 12 000 Number of hotel rooms 100 10 000 Number of hotels 80 8 000 60 6 000 40 4 000 20 2 000 . Office data). As the table below shows. entering the Polish market.

Polish Real Estate Market

Selected hotels in pipeline and planned (2016 – 2018)

Chain Brand Standard City

Białystok, Gniezno, Grudziądz,
Ibis Styles (6) 3*
Kraków, Nowy Sącz, Siedlce
Ibis Budget 1* Gdańsk
Accor/Orbis
Gdańsk, Suchy Las (Ibis Poznań
Ibis (2) 2/3*
Północ)
Mercure 3/4* Kraków
Gdańsk, Jelenia Góra, Lublin,
Hilton Hotels & Hampton by Hilton (4) 3*
Łódź
Resorts
Double Tree by Hilton 4* Wrocław
Katowice, Sulejów (Best Western
Best Western (3) 3/4*
Best Western Podklasztorze), Kraków
Best Western Premier 4* Wrocław

Marriot Hotels Renaissance by Marriot 5* Warszawa
& Resorts Moxy 3* Warszawa
Raffles Hotels &
Raffles 5* Warszawa
Resorts
Rezidor Radisson Blu (2) 4/5* Świnoujście, Zakopane
IHG Holiday Inn 4* Dąbrowa Górnicza, Warszawa
Puro Puro (2) 4* Łódź, Warszawa
Focus Focus (2) 3* Gdańsk, Białystok
Gromada Gromada 3* Kraków
De Silva De Silva 3* Poznań
Starwood Hotels Four Points by
3* Warszawa
& Resorts Sheraton
B&B B&B (2) 2/3* Katowice, Łódź
Motel One Motel One 2/3* Warszawa
Louvre Hotels
Campanile 2/3* Nowy Targ
Group

Source: EY

30 | Poland. The real state of real estate

Polish Real Estate Market

Focus on Warsaw In 2014 in Warsaw there were more than
4 million tourists which was an increase of
Warsaw is the largest hotel market in 6% compared to the previous year. Due to
Poland in terms of a number of hotel rooms the fact that Warsaw is perceived primarily
supply. It is also usually the first choice of as a business city, the majority of guests
the international brands that are entering using the hotel infrastructure in Warsaw are
the Polish market. business travel clients (75%).
According to data published by Central The average occupancy in five-star hotels
Statistical Office, in 2014 there were 70 in Warsaw in 2014 reached almost 80%, in
categorized hotels in Warsaw offering case of four-star hotels the occupancy was
totally almost 11,700 rooms. Three star slightly lower and equaled 75%. An average
hotels constituted 40% of all hotels in occupancy across all the hotel categories in
Warsaw and accounted for 30% of hotel Warsaw in 2014 stood at around 70%.
rooms supply. There were 9 five star- and
10 four-star hotels, accounting for 22% The table below presents main hotel
and 26% of total number of hotel rooms in projects in Warsaw that are either in
Warsaw, respectively. pipeline or in the planning phase.

Hotel projects in Warsaw
Opening
Chain/Brand Standard Location Number of rooms
date
Marriot /
Renaissance 5* Żwirki i Wigury St. 225 Q4, 2016
Marriot
Raffles Hotels &
Krakowskie
Resorts / Hotel 5* 101 Q4, 2017
Przedmieście St.
Europejski
Puro 4* Widok St. 180 2018
InterContinental
corner of Twarda
Hotels Group / 4* 254 Q1, 2018
St. and Żelazna St.
Holiday Inn
Motel One 2/3* Tamka St. 180 Q2, 2018
Starwood Hotels corner of
& Resorts / Four 3* Suwak St. and 192 Q4, 2018
Points by Sheraton Konstruktorska St.

Poland. The real state of real estate | 31

Polish Real Estate Market

Opening
Chain/Brand Standard Location Number of rooms
date
200 rooms (Moxy)
Marriot / Moxy & 100 extended
3* Wilanowska Ave. 2019/2020
Residence Inn stay apartments
(Residence Inn)
Hotel Koneser
(hotel chain and 4* Ząbkowska St. 140 n/a
brand not revealed)
Hotel 52 n/a Prądzyńskiego St. 468 n/a
corner of
Aparthotel Wola Kasprzaka St.
416 Q4, 2017
Invest (condohotel) and Prymasa
Tysiąclecia Ave.

Source: EY

According to the table above, the next 750 new rooms and apartments to the
two years (2016 and 2017) will see the Warsaw market and will increase the total
opening of three upscale hotel projects supply of hotel rooms in Warsaw by 6%.
– Renaissance Marriot, Hotel Raffles In 2018 additional 800 rooms are to be
Europejski and Aparthotel Wola Invest. delivered in the four schemes.
Together, these hotels should add almost

32 | Poland. The real state of real estate

1. However. Over this period the volume of transactions averaged just under EUR 4 billion a year.5 billion in 2006. That year marked the beginning of an intensive four year period of foreign investment on the Polish market. It was not until 2004 and the advent of an EU membership that the situation improved. development of Polish commercial investment market trailed behind the rest of the real estate market. The increasing number of transactions has not only stabilized investments but completely changed the structure of yields (downward) and prices (upward).6. a far cry from 2001 when foreign investments were more or less limited to a Warsaw office market. The real state of real estate | 33 . with a record-breaking volume of over EUR 4. or mismanaged and over rented properties with high vacancy rates. Poland. Investment market At the outset. the early years saw the commercial investment market plagued with a lack of available investment schemes. Furthermore. There were few investors and yields were in the double digits. from 2010 onwards the market has substantially improved and in 2011-2014 total investors’ activity bounced back to an average under EUR 3 billion per year. Year 2009 obviously marked a historical low as less than EUR 500 m of transactional volume has been recorded.

NIAM. Reino The majority of players on the Polish real Partners JV Bluehouse Capital. in 2015 were Deutsche Asset and Wealth Management (RREEF). 2015 in Poland came from Polish capital. despite logistics in terms of transactional volume. Major investors Griffin Real Estate. and Tricity have been targeted more and more frequently by international and The most active real estate funds in Poland domestic investors. The main 34 | Poland. 20%). as acquisition of Echo Investment shares by Griffin or Trigranit by TPG Real Estate. it was not active in terms of acquisitions this year. TPG Capital. Kraków. WP Carey. Historically low interest rates. this dominant position was overtaken by their portfolios are based on stocks and regional cities. TH Real Estate. Netherlands and the UK. The minority share of Polish entities comes from the legal regulations as Polish Warsaw still remains a very important law does not allow local pension funds transaction market in Poland perceived by with substantial accumulated capital to many investors as core. in 2015 invest directly in the real estate. The real state of real estate . with a large prime one of the interesting trends in 2015. such properties’ portfolio. however. Global RE. and amounted to EUR 4 billion which was Less than 10% of investment volume in an increase of 31% compared to 2014. CBRE Global Investors. investment volume in 2015 came from US funds. Also Asian investors are interested in In terms of scale nearly 50% of the buying real estate assets in Poland. Austria. Benson Elliot. Deka. Immofinanz. For the first time asset manager PHN. estate investment market are foreign Bergold Group. Instead. Poznań corporate bonds. major investment activity was recorded in retail sector which outpaced office and The insurance company PZU TFI. Wrocław.Polish Real Estate Market In 2015 the total volume of investment reason were good quality assets and still transactions in Poland went up significantly attractive yields in Poland. entities mostly from Germany. with USA coming Newcomers in 2015 included Rockcastle to the lead in 2015. UK (8%) and the Netherlands (7%). as well as represented by dynamically developing stable macro-economic situation have investment fund Reino Partners and Polish contributed to this growth. still holds the position of a Large transactions on an entity level were major player in Poland. followed by Germany (ca. Union Investment.

warehouse) 2000–2015 5000 4000 3000 in mln EUR 2000 1000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: EY Major real estate funds investing in Poland Fund Sector Major Assets in Poland Retail. Silesia City Center. Warsaw Financial Center (JV with Allianz RE Office Tristan Capital Partners). Green Park and Avatar in Kraków Office. Galeria Leszno. Galeria Logicor Logistics Tęcza (Kalisz). Czeladź. Gliwice. Warehouse: properties in Łódź. retail. Sienna Center. Magnolia Park (Wrocław). Galeria Łomża. Wzorcownia Włocławek. Dukat Logistics (Olsztyn) Shopping malls: Twierdza Kłodzko. Atrium Retail Galeria Dominikańska. Blackstone / Retail. Okopowa 56 (Warsaw). Piaseczno Saski Point. Galeria Pestka (Poznań). Warsaw CA Immo Office Towers. Mokotów Plaza. Błonie. Saski Crescent. Atrium European RE Felicity in Lublin Aquarius Business House (Wrocław). Polish Real Estate Market Total investment volume in all sectors (office. The real state of real estate | 35 . Platinium Business Park Atrium Promenada. Atrium Targówek. Harmony Office Azora Office Center. Jutrzenki Business Park. Kraków. Bergold Group Retail. Twierdza Zamość (Zamość). Łazy. Atrium Reduta. Teofilów Business Park (Łódź). Bitwy Warszawskiej Poland. Focus Park in Bydgoszcz.

Prologis Park Warsaw & Będzin.SHOP and Vivo! retail parks (accross Poland). Raben Gądki Logistics & Grodzisk Mazowiecki STOP. Lubicz Office Center (Kraków). Chmielna 25. Griffin RE House. Galeria Mazovia. Raiffeisen Business Center (Warsaw). Warsaw (50%). Green Day GLL Real Estate Office (Wrocław). Mokotowska Square. Młodziejowski Palace Kulczyk Ethos (Holland Park). Forum Gliwice. Silverstein Mazowiecka 2/4. The real state of real estate . Crown Square (Warsaw). Renaissance. Microsoft Office. Supersam (Katowice). Andersia Hotel Tower (Poznań). Wars Sawa Junior. Office. Brama Zachodnia. Nowogrodzka 21. Stratos. Sky Office. Empark Mokotów (Warsaw). Warsaw Distribution Centre. Jupiter shopping center. Lone Star (GTC) Office Europlex (Warsaw) 36 | Poland. Ufficio Primo. North Gate. Plac Małachowskiego. Krucza Retail Properties House Wiśniowy Business Park. Złote Tarasy . IVG (Triuva) Office Norway House. Park Postępu. King Cross Office Praga International Business Center (Warsaw). Nestle House.partial Industrial. Millenium Plaza. Plac Unii. Marynarska Business Park. Equator I. Intercontinental Office. Koszyki Hall. Royal Trakt Offices. Warta Tower. Renoma Retail shopping center (Wrocław). Irydion. Victoria Buliding.Polish Real Estate Market Fund Sector Major Assets in Poland Idea Idea I-III. Andel’s Hotel (Kraków) Kazimierz Business Center (Kraków). Manhattan Retail. Galeria Heitman Retail Malta Ambassador. Investors interest. Marynarska Point. Zaułek Piękna. Atrium Deka Logistics. Invesco Retail Galeria Kazimierz (Kraków) LePalais. Nimbus. Dom pod Gryfami. Bema Plaza (Wrocław). Bokserska Office Immofinanz Retail Center. Hines (Warsaw). Green Horizon (Łódź) Office. Office. Feniks. Tarasy Zamkowe (Lublin) Office. 1. Nowa Emilia planned office. CBRE Global Business & Distribution Centre. Proximo Office. Liberty Corner (Warsaw) Echo Investment Porftolio. Galeria Tarnovia.

PZU TFI Retail. Retail. Marynarska Point 2. Katowice Business Point. Alma Nowy Targ Kapelanka (Kraków). Złote Tarasy (77% interest). Unibail Rodamco Lumen&Skylight. Office Galeria Jeziorak.partly sold T-Mobile Office Park. Andersia Business Center Logistics (PHN) (Poznań). Athina Park (Warsaw). Metropolitan. Alfa Plaza (Gdynia). Quattro Forum (Wrocław). Mokotów Nova (Warsaw). Galeria Echo Pabianice. Europolis Park Błonie. Topaz. Office. Orange Labs. Arkonska Business Park (Gdańsk) . Galeria Turzyn. Łopuszańska Business Park Starwood Capital Office (Warsaw). University Business Center. SEB Office Philips Building (Łódź). Bonarka 4 TPG Capital Retail. Rondo 1. Arkońska Business Park (Gdańsk). Solaris Centre (Opole). Intraco (Warsaw). Business. Filtrowa. Tristan Capital Office.last two in a JV with Bluehouse Capital Rockcastle Karolinka. Green Corner. CH Dąbrówka. The real state of real estate | 37 . Trigranit Portfolio (Bonarka City Center. EC Powiśle (JV) Galeria Mokotów. Quattro Business Group Park (Kraków) Office. Nefryt. Nieruchomości Foksal City. Arkadia. Jantar Partners Retail shopping center (JV). Alchemia phase 2 (Gdańsk) Logistics. Alchemia Reino Partners Office phase 1 (Gdańsk) . Fabryka Wołomin RREEF Stary Browar (Poznań). Polish Real Estate Market Fund Sector Major Assets in Poland Baltic Business Center. Octava S. Platan (Zabrze). CH Borek. etc. Europolis Park Logistics Poland Central Warsaw Financial Center (JV). Panattoni Warehouses Łódź. Pogoria (Dąbrowa Retail Global Investors Górnicza). Warszawa Wileńska (Warsaw). Focus (Deutsche Office.A. Enterprise Park (Kraków). Arena (Gliwice). Salzburg Center (Warsaw). Red Tower (Łódź) Polski Holding Domaniewska Office Hub. Senatorska mbank HQ. Office Wroclavia under construction (Wrocław) Poland. Malta House (Poznań). Nordea House Asset & Wealth Retail (Warsaw) Management) Trinity Park III . Office Lighthouse II (Warsaw). Riverside Park.). Gdańsk & Wrocław.

Radisson Blu (Wrocław) CH Janki. By 2008 financial crisis around the globe acquisition of Europlex by Lone Stare (GTC). Union (Rybnik). The last few years show Griffin or Polkomtel headquarters by WP that investment market is on the rise Carey. Manufaktura (Łódź). expecting convergence with the EU levels (i. 2014 has brought record oversupply to the Warsaw office market which resulted in • falling PLN interest rates. compression have exceeded even the most aggressive expectations. Holiday Inn. again. Piaseczno Business Park. CH Kometa. it is more stable and less aggressive than before 2007. Błonie Business Park. City Point. represented by i. Hotel. Zebra Tower. However. WP Carey Logistics (Mszczonów & Tomaszów Mazowiecki). with some of its momentum. yields and sell at lower yields. acquisition of Bonarka 38 | Poland. Retail. Office Hampton by Hilton (Warsaw). cap rate Therefore investors have started to focus compression). Sarni Stok (Bielsko-Biała). CH Rondo. The • EU membership. FM Office. Gazowa Industrial Park Polkomtel HQ. and in 2015 Warsaw lost its dominant position on the office market in While rising prices from the cap rate terms of transaction volume. had placed many investors in the “wait purchase of Raiffeisen Business Center by and see” mode. CH King Cross. on other cities.Polish Real Estate Market Fund Sector Major Assets in Poland Riviera Mall (Gdynia). H&M Logistics distribution center Source: EY For the past several years economic Office properties development and political stability have Office investment market in Poland has played a key role in the increase of been dominated by Warsaw. Valad Logistics Raszyn Business Park. Horizon Plaza.a. Other important factors were: foreign investors over the last years. higher vacancy rates and shrinking supply Investors were seeking to buy at high of fully leased prime assets. Techniczna Industrial Park. Focus Park Retail. The real state of real estate . On the other hand combined volume in other cities is estimated at EUR 750 m.e. Lipowy Office Park (Warsaw). by the third Office transactional volume in Warsaw in quarter of 2007 the economy had lost 2015 totalled approx. CH Tulipan. attracting most transactions. EUR 500 m. Dominikański Office. such major transactions as buyout of 50% shares in Empark Mokotów by Immofinanz. Investment Senator. CH Ster.

and prime office yields hovered Skanska’s office properties (Kraków and between 6 and 6. Aviva Lone Star (GTC) Plaza (Katowice). Axis (Kraków) Avestus Capital Tristan Capital Enterprise Park Kraków Partners Partners Kazimierz Business Center Kraków GTC GLL Real Estate Andersia Business Center Poznań Von der Heyden PHN Reino Partners JV Malta House Poznań Skanska Bluehouse Capital Reino Partners JV Alchemia phase 1 Gdańsk Torus Bluehouse Capital Source: EY Poland. 2015 Building Location Seller Buyer Wiśniowy Business Park (A). 5. Warsaw. The real state of real estate | 39 .5% were struck for the best performing Enterprise Park by Tristan. They broke the more and more attention among investors. appeared to be polarized around either Capitalization rates had seen a steady 6% . Irydion (Warsaw). Kapelanka phase Skanska NIAM Kraków 2. portfolio of 4 properties. 10% mark for the first time in 2003 and due to a smaller number of prime assets went on to shed roughly a percentage point available for sale.5% for prime properties or 9-10% for decline in Warsaw from the double digit value-added ones which have been gaining days from 1995 to 2002. (Katowice).5%. Katowice) purchased by Swedish NIAM or Capitalization rates in 2015 generally Alchemia I acquired by Reino Partners.7. Polish Real Estate Market for Business by TPG (on an entity level). Millenium Katowice. per year until 2007 when deals as low as Major office building transactions in Poland. pan CEE- Prague portfolio Empark Mokotów (50% share Warsaw Heitman Immofinanz buyout) Polkomtel HQ Warsaw Polkomtel WP Carey Europlex Warsaw Akron Group Lone Star (GTC) Nestle House Warsaw Kronos Kapital Hines Silesia Business Park A & B Katowice.

with downward to roughly 8% and continued following examples: Karolinka and Solaris this downward trend through Q3’ 2008 Center (Opole) Pogoria (Dąbrowa Górnicza).4% yield. Dąbrowa Karolinka & Pogoria BlackRock Rockcastle Global RE Górnicza IGI (Irlandzka Grupa Solaris Centre Opole Rockcastle Global RE Inwestycyjna) Platan Zabrze Triuva (IVG) Rockcastle Global RE Rockcastle Global RE Fabryka Wołomin Wołomin Fulcrum Properties JV Acteeum Factory Annopol & Warsaw. Sfera and Sarni Stok Due to the crisis the capitalization rates (Bielsko Biała) or Focus Bark (Bydgoszcz). The real state of real estate . when they ranged between 5. with capitalization rates EUR 290 m at 5. 2015 Building Location Seller Buyer Fortis (Grażyna Stary Browar Poznań RREEF Kulczyk) Riviera Gdynia Mayland Union Investment Opole. Kraków Neinver TH Real Estate Futura Park Kraków Futura Park Wrocław Wrocław Neinver LaSalle Investment CBRE Global Sfera Bielsko-Biała n/a Investors CBRE Global Sarni Stok Bielsko-Biała Union Investment Investors Source: EY 40 | Poland.5%.5%. property in Warsaw and other Polish cities Approx. as well as Stary at the level of 9–10.Polish Real Estate Market Retail properties percentage point to fall again in 2015 Significant investments in the retail market because of the increased demand on the did not start until 2001. EUR 285 m at Since that time nearly every significant 5. have increased by approximately 1–1.5 Major modern retail transactions. The first major retail market. By recorded in regional cities and the 2005 capitalization rates were pushed remaining half in smaller cities.7% and 6. 50% of total retail volume was has been a subject of a transaction. transactions were investments by Rodamco In 2015 the largest retail deals included in Galeria Mokotów and in Złote Tarasy and Riviera Shopping Center in Gdynia sold for took place in 2003. Platan (Zabrze).7% yield. Browar in Poznań sold for ca.

Polish Real Estate Market

Warehouse properties As a result, a significant increase in the
The warehouse market has historically been number of industrial transactions was
perceived as the least mature of the real observed in years 2012 - 2014 with record
estate sectors, with only a few significant high volume of over EUR 700 m in 2014
transactions closed. followed by correction in 2015 at approx.
EUR 500 m.
However, over the last several years
warehouse sector has become one of the The largest transactions in 2015 included
most dynamic and rapidly expanding. acquisition of MLP Bieruń and Tychy by
Main reasons of this phenomenon were: Deka, sale of Prologis Park Wrocław III
substantial infrastructural development, and V to Norges Bank (as part of a larger
growth of e-commerce, friendly business portfolio transaction) and acquisition
environment, as well as highly qualified and of Europolis Park Błonie and Piotrków
relatively cheap labour force encouraging Trybunalski by TPG JV Ivanhoe Cambridge.
large number of manufacturers to relocate Capitalization rates for the modern, best
production facilities to Poland. performing properties are around 7.0 -
7.5%.

Major warehouse space transactions, 2015
Building Location Seller Buyer
Bieruń, Tychy
MLP Bieruń & MLP Tychy MLP Group Deka
(Silesia)
Europolis Park Błonie P3 (jv of TPG
Błonie, Piotrków CA Immo jv
and Europolis Piotrków and Ivanhoe
Trybunalski EBRD
Trybunalski Cambridge)
7R Logistics Center 7R Logistic SA
Kowale (Pomeranian) Hillwood
Kowale JV HE Dutch BV
Prologis Park Wrocław Norges Bank
Wrocław Prologis
III & V (NBIM)
Tomaszów
FM Logistic Mazowiecki, FM Logistic WP Carey
Mszczonów
Stryków & Piaseczno Gramercy
Stryków, Piaseczno n/a
logistic facilities Property Trust
CBRE Global
Ideal Idea II Warsaw BPH TFI
Investors
Source: EY

Poland. The real state of real estate | 41

1.7. Key cities in
Poland

42 | Poland. The real state of real estate Photo by Marta Jaślan

Polish Real Estate Market

WARSAW
Population 1,735,000

Unemployment 3.5%

Major industries Trade and services

Accenture, Bank Pekao, BGŻ, mBank, British American Tobacco,
Budimex, Bumar, Citibank, Coca-Cola, Colgate Palmolive, Deloitte,
EY, France Telecom, General Motors, Grupa Żywiec, GTC, Huta
Major companies Arcelor Warszawa, IBM, ING, Kompania Piwowarska, KPMG,
Kraft Foods Polska, Nestle, PGNiG, PKO BP, PLL LOT, Polkomtel,
Procter & Gamble, PwC, PZU, RBS, RWE, Samsung Electronics
Polska, Shell, Skanska, Strabag, Unilever

OFFICE SECTOR
Rental level Central Business District: EUR 15 – 23.5;
(m2/month) Non-central: EUR 11 – 15

Total office Stock 4.6 million m2 of modern space

Adgar Plaza, Ambassador, Atrium 1, Atrium Complex, Business
Garden, Catalina Office Center, Cristal Park, Domaniewska Office
Hub, EMPARK, Equator, Eurocentrum, Flanders Bussines Park,
Focus, Gdański Business Centre, Harmony Office Center, Horizon
Plaza, Feniks Office Building, Focus, IO-1, Jerozolimskie Business
Park, Karolkowa Business Park , Konstruktorska Business
Current supply Center, Kopernik Office Buidlings, Lipowy Office Park, Lumen,
(selected buildings) Marynarska Business Park, Marynarska Point, Metropolitan,
Milennium Plaza, Mokotów Business Park, Mokotów Nova,
Mokotów Plaza, Nefryt, North Gate, Okęcie Business Park,
Park Postępu, Platinium Business Park, Poleczki Business Park,
Plac Unii, Rondo 1, Royal Wilanów, Saski Crescent, Saski Point,
Senator, Skylight, Trinity Park, Tulipan House, Warsaw Financial
Center, Warsaw Trade Tower, Wilanów Office Park, Wiśniowy
Business Park, Wolf Marszałkowska, Zebra Tower

Poland. The real state of real estate | 43

Galeria Mokotów. Prime Corporate Center. Annopol. Klif.0 – 5. Factory Outlet. Auchan Piaseczno WAREHOUSE SECTOR Rental level EUR 2. Eurocentrum Office Complex II. Warsaw Spire General vacancy 12. Galeria Rembielińska. Nowa Future supply Stacja Hala Koszyki (reconstruction). Auchan Łomianki. Lincoln Park. Silver Tower. Platiunium BP VI. Wolf Bracka. King Cross. Fashion House Piaseczno. Factory Ursus. Astrum Business Park. Proximo. CH Janki. Neopark. EQlibrium. CH Bemowo. Mokotów One.Polish Real Estate Market Art Norblin. Balmoral Buisiness Centre.0 (m2/month) Total warehouse 2. M1 Marki. CH Wileńska.9 million m2 stock 44 | Poland. Ferio Wawer. West Point. Atrium Promenada. Fabryka Wołomin. Centrum Marszałkowska. Wołoska 24. Liberty Tower. Business Garden III-VII. Sienna Towers. Vector. Roma Tower. South Park. Grzybowska 43. Atrium Targówek.6 million m2 of modern space Arkadia. Cedet. Future supply Hala Koszyki. Plac Vogla Galeria Legionowo. Dom Towarowy Braci Jabłkowskich. Galeria Wilanów. Infinicity. EC Powiśle. Plac Unii Shopping Center. Mennica (selected buildings) Tower.3% level RETAIL SECTOR EUR 90 – 120 for prime shopping center units Rental level EUR 70 – 95 for prime street units (m2/month) EUR 40 – 70 for shopping center units EUR 10 – 20 for retail park units Total retail stock 1. Spinnaker Tower. Atrium Reduta. Atrium 2. Galeria Północna. Q22. Wola Current supply Park. Grójecka Offices. Blue City. Generation Park. Galeria Brwinów. Factory Outlet Ursus. West Station. Flanders next phases. The real state of real estate . Fort Wola. Sadyba Best Mall. Złote Tarasy.

Manhattan Business and Distribution Center. ProLogis Park Nadarzyn. Coca–Cola Niepołomice. City Point. Orange Office Park II. Rondo Business Park. Shell. tobacco. Europolis Park Błonie. Oddział Major companies w Krakowie. supply in Warsaw Panattoni Park Garwolin. Galileo. F. G21. Meduza. Centrum Biurowe Euromarket. UBS. ArcelorMittal Poland S. steelworks and metallurgy. IT BP. Motorola. Buma Square. Polish Real Estate Market Annopol Logistic Park. International Paper. Platan Park. Alstar Office Center.5 % Major industries Tourism. ComArch. Centrum Biurowe Lubicz. Nowa Kamienica.5 (class–A space) (m2/month) EUR 11 – 14 (class–B space) Total office stock 750. Diamond Business Park Piaseczno. Dot Office. Azbud Business Center. Żerań Park. GO Center. Quattro Business Park. Kazimierz Office Center. Green Office. ProLogis Park Warsaw. Diamante Plaza. Onyx. Enterprise Park.. Newton.000 m2 of modern space Aleja Pokoju 5. Alma Tower. Łopuszańska Business Park. Can Pack. Fronton. Delphi. Teva. Panattoni Park Błonie. Wawel OFFICE SECTOR Rental level EUR 14 – 15. Vistula Group S. ProLogis Park Sochaczew. Wawel HQ Poland. Kraków Business Park (Zabierzów). Panattoni Park Ożarów. Good Poin Puławska KRAKÓW Population 761. Philip Morris. Bonarka4Business. The real state of real estate | 45 . Bonarka4Business E. Opolska Future supply Business Park. Brama Bronowicka. ProLogis Park Teresin. Topos. Vinci Office Center Axis. Portus. HSBC. CBiI Copernicus. Edison. G. ProLogis Park Błonie. Cracovia Business (selected buildings) Center.A. Panattoni area Park Teresin. Panattoni Park Pruszków. Avatar.900 Unemployment 4. Capgemini. Google. Diamond Business Park Warsaw. Centrum Current supply Biurowe Kazimierz. pharmaceuticals. State Street. Pascal.A. Krakowska Distribution Center. Millenium Logistic Current and planned Park Pruszków. Segro Business Park Tulipan Park Warszawa.

Polish Real Estate Market General vacancy 5. Castorama. III.2% Major industries Food processing. Bonarka.50 (m2/month) Total warehouse 212.000 m2 stock Current and planned Logistic Center Kraków I.75 for prime shopping center units Rental level EUR 50 – 80 for prime street units (m2/month) EUR 40 – 60 for shopping center units EUR 10 – 15 for retail park units Total retail stock 750. CH Wielicka. II. chemical. Kraków Airport Logistics Centre. MK Logistics Park. Panattoni Park Kraków POZNAŃ Population 546.50 . Solvay Park.4. The real state of real estate . Kraków Plaza. CH Czyżyny. automotive.000 m2 of modern space Galeria Krakowska. IKEA. CH Dekada Park. location of major trade fairs in Poland 46 | Poland.000 Unemployment 6. services (including finance and banking). supply MARR Business Park. CH Zakopianka. Galeria Kazimierz.5% level RETAIL SECTOR EUR 65 . Current supply M1 Kraków. CH Krokus. Futura Park. electro technical. construction industry. Galeria Bronowice Future supply Serenada Shopping Center WAREHOUSE SECTOR Rental level EUR 3. retail.

Franklin Templeton Investments. Nowe Garbary. Galeria Sucholeska. Park Handlowy Franowo. Kwadraciak. Beiersdorf. Kupiec Poznański. Ubiq Winogrady Business Center Future supply Bałtyk Tower. Maraton. Za Bramką General vacancy 15. Rataje 164. McKinsey.50 for prime street units (m2/month) EUR 35 – 50 for shopping center units EUR 7 – 12 for retail park units Total retail stock 705. Jeronimo Martins. CPC International. Poznań Financial Center. Enea. Skalar Office Center. Galeria Malta. ETC – Swarzędz. CH Piątkowo. Temida.000 m2 of modern space Andersia Business Centre. Andersia Tower. PGK Centrum. Galeria Pestka. Current supply Galeria MM. Auchan – Swadzim and Komorniki. MAN. The real state of real estate | 47 . Jet Office. RB House. Dwór Hamburski. Wrigley. Nobel Tower. Microsoft. Nestle. King Cross Marcelin. City Park. Major companies Lorens Bahlsen. Nickel Technology Park. Malta Office Park. Volkswagen. Green Point. Poznań Plaza. IKEA. Poznańskie Centrum Biznesu. Carlsberg. Wyborowa OFFICE SECTOR Rental level EUR 14 – 15 (class–A space) (m2/month) EUR 11 – 13 (class–B space) Total office stock 380.9% level RETAIL SECTOR EUR 65 – 80 for prime shopping center units Rental level EUR 40 .000 m2 of modern space Stary Browar. Galeria Panorama. Galeria MM Poland. Kompania Piwowarska. CH Malta. Okraglak. Galeria Podolany. Omega. CH Franowo. Centrum Tulipan. IKEA. Szyperska Office Center. Unilever. Poznań City Center. (selected buildings) Malta House. Globis. Factory Outlet – Luboń. Polish Real Estate Market Aluplast Austria. Nowe Jeżyce. Bridgestone. Delta. GlaxoSmithKline. CH Current supply M1. Business Garden Poznań. Międzynarodowe Targi Poznańskie. Kupiec Poznański.

Elektrociepłownia Wybrzeże. Millennium Logistic Park Current and planned Poznań.0% Maritime industry. IKEA. LPP. Lido Technology Poland. food processing. DGT. Gdańskie Młyny i Spichlerze Dr Cordesmeyer. ProLogis Park Września. Stocznia Północna.000 m2 of modern space 48 | Poland. Grupa Lotos. Panattoni Poznań I.1 . ProLogis Park Poznań I. II. Goodman Poznań II Logistic Center TRI–CITY Population 747. Point Park Poznań. fuel industry. The real state of real estate . Thomson Reuters OFFICE SECTOR Rental level EUR 13 – 13. Gdańskie Zakłady Nawozów Fosforowych. Lufthansa Systems.3.50 (class–A space) (m2/month) EUR 10 – 12 (class–B space) Total office stock 580. Mostostal Gdańsk. Jysk Polska. II. Neste. Major companies Energa. Metro AG. Panattoni Robakowo. Galeria A11 WAREHOUSE SECTOR Rental level EUR 3.38 million m2 stock CLIP Poznań. III. Intel Technology Poland. Park supply Magazynowy Logit. ZPC Bałtyk.Polish Real Estate Market Future supply Posnania.Doxler Business Park. CH Metropolis. PepsiCo. Bank BPH. Tulipan Park Poznań I. IT Bayer SSC. III. Blue Media. Segro Logistic Park Poznań. Gdańska Stocznia Remontowa.5 (m2/month) Total warehouse 1. construction. Shell. II. Satel.000 Unemployment 4. Elektromontaż. Amazon Warehouse. Major industries tourism.

IKEA. Nordika. Pasaż Przymorze – Kołobrzeska 32. Morski Park Handlowy. Ka5. ETC Gdańsk and Auchan WAREHOUSE SECTOR Rental level EUR 3. CH Klif. Pomerania Office. City Arkade. Centrum Kwiatkowskiego. Alfa Plaza. Centrum Kowale Future supply Forum Radunia. Szperk Gdynia.000 m2 of modern space Small shops and boutiques along shopping streets (Świętojańska in Gdynia. ETC Gdańsk. The real state of real estate | 49 .000 m2 stock Poland. Batory. Polish Real Estate Market Akwarium. Arkońska Business Park. Alfa Center. City Forum. Tesco. Grunwaldzka buildings) 48. Długa and Grunwaldzka in Gdańsk as well as Monte Casino in Sopot). CH Manhattan. Castorama. Selgros Cash and Carry. Galeria Morena. CH Oliwa. Centrum Biurowe Neptun. CH Wzgórze. Real. Ambra Tower. Current supply Krewetka Cinema City. Olivia Busienss Centre. BCB Business Park. Łużycka Office Park. Tryton Business House. Madison Shopping Gallery. Centrum Haffnera. Fashion House Gdańsk.0 – 3.50. CH Riviera.8% level RETAIL SECTOR EUR 35 – 50 for prime shopping center units Rental level EUR 27 – 45 for prime street units (m2/month) EUR 25 – 35 for shopping center units EUR 8 – 12 for retail park units Total retail stock 682. Centrum Current and planned Kwiatkowskiego. Vigo.4 (m2/month) Total warehouse 314. WAN – Śląska. Morski Park Handlowy. Tesco Chełm. Auchan Port Rumia. Piano House. Centrum Biurowe Hossa. Galeria Przymorze. Sanipor. Office Island. Osowa Shopping Center. Łużycka Plus Sadowa Business Park. Grunwaldzka 413. Grunwaldzka 417. Waterside General vacancy 10. Alchemia. Garnizon supply (selected Idal House. Opera Office. Matarnia Retail Park. Modern shopping centers: Galeria Bałtycka. Centrum Rodzinne Witawa.

Centrum Biznesowe Faktoria.9% level RETAIL SECTOR EUR 45 . Park Biznesu Teofilów. Orange Plaza. Major companies Polish Pharmaceutical Group Pollena–Ewa S. HP. Orion Business Tower. Przędzalnia Braci Muehle.5 (class–A/B space) (m2/month) Total office stock 300. Vistula & Wólczanka OFFICE SECTOR Rental level EUR 12 – 13.. Gdańska. Cottonhouse. Unicity. Phillips. Centrum Biurowe Zenit. Symetris Business Park.Polish Real Estate Market Modern warehouse ProLogis Park Gdańsk. Synergia. University Business Park. Amcor. 7R Logistic Park construction Gdańsk. Green Horizon. Cacao Berry. stock under Panattoni Park Gdańsk.000 Unemployment 10. Port Gdynia Warehouse. (selected buildings) Kopcińskiego. Centrum Biznesowe Stanley. Real Office. Grupa Atlas. food processing.55 for prime shopping center units Rental level EUR 22 – 40 for prime street units (m2/month) EUR 23 – 35 for shopping center units EUR 7 – 13 for retail park units 50 | Poland. Pomeranina Logistic Center ŁÓDŹ Population 706. Centrum Biznesu Łódź. Fujitsu. Textilimpex. Media Hub. Centrum Logistyczne Pruszcz Gdański. Jaracza Prestige. trade fairs ABB. Wólczańska.3% Major industries Textile & clothes. Red Tower. Coca– Cola. University Business Park II General vacancy 6. Infosys. Nordea. Bosch–Siemens Hausgeräte.A. SEGRO Logistics Park. Papiernicza. Idesit. Centrum Biznesu Pracownia. mechanical engineering. Sanitec Koło. Armada Business Park. Inter-Mar. Dell. Cross Point Łódź.000 m2 of modern space Aleksander Plaza. Fabryka Current supply Lnu. Business House. Prometeon Łódź. chemical production. Łódź 1 Future supply Aurus. The real state of real estate . Aviator.

CH Tesco Bałuty. ProLogis Park Stryków. pharmacy/medical assortment. Panattoni Park Stryków WROCŁAW Population 634. Port Łódź.500 Unemployment 3. Toyota. medical machinery production. Cadbury. The real state of real estate | 51 . CH Ptak in Rzgów.4% Major industries automotive. Panattoni Business Center Łódź.16 million m2 stock Business Park Łódź. Nokia. KRUK. Castorama. CH Carrefour Przybyszewskiego. Praktiker. BZ WBK. Major companies GK Impel Hewlett–Packard. OBI. MacoPharma. CH M1.2 for modern space (m2/month) Total warehouse 1. Leroy Merlin. CH Carrefour Kolumny. IT. Modern shopping centers: Manufaktura. PPG-Polifarb. Credit Agricole. Ptak Outlet. Leclerc. Siemens. Tulipan Park Stryków. Alcatel. Tulipan Center. US Pharmacia. Diamond Current and planned Business Park Stryków.000 m2 of modern space Small boutiques along Piotrkowska street. Google.AmRest. house appliances and food processing 3M. Parkridge Poland region Business Center. supply in Central Panattoni Łódź East. Diamond Business Park Łódź. E. Panattoni Castorama. Polish Real Estate Market Total retail stock 675. Sukcesja Future supply Łódź Plaza WAREHOUSE SECTOR Rental level EUR 3. CH Guliwer. metallurgy. EY SSC. Pasaż Current supply Łódzki.4 – 4. SEGRO Logistics Park Stryków. GK Kogeneracja. Ultimo. Volvo. Selgros Cash & Carry. Eurobank. Whirlpool Poland. IBM. LG. Makro Cash & Carry. Wabco. Panattoni Park Łódź South. CH Tesco Widzewska. business process offshoring. Credit Suisse. Bosch. Vis a vis Street Mall. Tulipan Park Łódź. Galeria Łódzka. finances. electrical.

Arkady Wrocławskie. New Point Offices. Beta Centre. Arkady Wrocławskie. IKEA. Nobilis General vacancy 8. Szwedzka Centrum. TGG. Kaufland. Galeria Dominikańska. Wratislavia Tower. Quattro Forum. Millennium Tower. West Gate Future supply Business Garden.000 m2 of modern space Aquarius Business House. Silver Forum. Retail Park Młyn.000 m2 of modern space Pasaż Grunwaldzki.50 (class–A space) (m2/month) EUR 11 – 12. Tesco. CH Korona. Promenady Epsilon.6% level RETAIL SECTOR EUR 65 – 75 for prime shopping center units Rental level EUR 44 – 60 for prime street units (m2/month) EUR 20 – 40 for shopping center units EUR 8 – 12 for retail park units Total retail stock 687.Polish Real Estate Market OFFICE SECTOR Rental level EUR 14 – 14. Ferio Gaj. West House. Green Towers. Auchan Retail Current supply Park Bielany. Focus Plaza. Oławska Prestige. Bielany Retail Park (IKEA). Magnolia Park. Sky Tower. Globis Current supply Wrocław. Wrocławski Park Biznesu.50 (class–B space) Total office stock 665. Szewska Center. CH Borek. Cuprum Square. Renoma (after modernization). Family Point. Wroclavia 52 | Poland. Bema Plaza. Długosza Busienss Park. Dominikański. Racławicka Center. E. Cuprum Novum. Heritage Gates. Asco Business Centre. Dubois 41. CH Marino. Oniro. The real state of real estate . Silver Tower. Pasaż Pkoyhof. Grunwaldzki Center. Leclerc. Legnicka Park. Factory Outlet. Renaissance Business Centre. Platon. Sky Tower. Aleja Bielany Future supply Galeria Idylla. (selected buildings) Hubska Office Center.

automotive. Chorzowska 50.50 (class–A space) (m2/month) EUR 10 – 11. Polish Real Estate Market WAREHOUSE SECTOR Rental level EUR 2. Millennium Plaza Katowice. GK Kopex. Górnośląski Park Przemysłowy. information and IT Capgemini. DuPont. Revita Park Poland. printing. GK Farmakol. PwC SSC. Centrum Current supply Biurowe Francuska. Jesionowa Business Point. Apiss Center Point.5 (m2/month) Total warehouse 1. Prologis Park Wrocław V. Roca.8 . Centrum Biurowe Katowice. Kostki.8% Major industries Coal mining. Unilever. Atrium. metallurgical. Parkridge Business Center. ZPUE. electrical.28 million m2 of modern space stock ProLogis Park Wrocław (I & II) – Bielany Wrocławskie. (selected buildings) Euro-Centrum Katowice. Powertrain Polska. The real state of real estate | 53 .000 m2 of modern space Altus. Tiner Logistic Center – Pietrzykowice. GK Famur.000 Unemployment 3. Panattoni for Amazon.3. Panattoni Current supply Park Wrocław – Bielany Wrocławskie. Goodman for Amazon KATOWICE Population 302. Węglokoks OFFICE SECTOR Rental level EUR 13 – 13. IBM. Rawa Office. Armii Krajowej 6. steel. Nowe Katowickie Centrum Biznesu. Electrabel Polska. GK Tauron Polska. machinery. ING. ceramic.50 (class–B space) Total office stock 390. Katowicki Major companies Holding Węglowy. Polski Koks. Panattoni BTS for Lear.

ProLogis Park Ujazd. Millenium Logistic Park Tychy. ProLogis Park Current and future Będzin I & II. Media Markt. ProLogis Park Sosnowiec. Alliance Logistic Center Silesia.2% level RETAIL SECTOR EUR 49 – 65 for prime shopping center Rental level EUR 25 – 47 for prime street units (m2/month) EUR 20 – 35 for shopping center units EUR 9 – 11 for retail park units Total retail stock 1. 3 Stawy. Galeria Skarbek. Piaskowa Business Center. ProLogis Park – Dąbrowa supply in the Upper Górnicza. Panattoni Park Bielsko-Biała 54 | Poland.7 million m2 stock Tulipan Park Gliwice. ProLogis Park Chorzów. Panattoni Park Czeladź.4. Galeria Auchan. Silesia Busi ness Park I. Dom Handlowy Zenit. The real state of real estate . Rawa Park Handlowy. Panattoni Park Mysłowice. OBI. Current supply Castorama. Diamond Silesia region Business Park Gliwice. Galeria Nowy Róździeń Future supply Galeria Echo Katowice WAREHOUSE SECTOR Rental level EUR 3. Galeria Katowicka. Retail Park RAWA (IKEA).0 (m2/month) Total warehouse 1. Silesia Star I General vacancy 13.Polish Real Estate Market Future supply A4 Business Park II. Cross Point Distribution Center Żory.5 . Panattoni Park Gliwice. III.3 million m2 of modern space Silesia City Center I and II (extension). CH Dąbrówka.

Poland. The real state of real estate | 55 .

The real state of real estate .2 56 | Poland.

–2. followed by an assessment of related important tax consequences. we discuss the relevant procedures and key considerations in detail in section 2. Taken together. on investment vehicles and structures presenting information on the most common structures used in real estate investments in Poland.8.Legal and tax aspects of investing in real estate This Chapter considers the most important legal and tax issues arising during each of the following five stages of a real estate investment: • Financing • Acquisition • Development and construction • Operation and exploitation • Sale The Chapter is arranged so that each of the above aspects is dealt with in a separate section (2. Poland.). The section 2. financial and tax due diligence are also fundamental to any investment cycle and given the importance of due diligence to any transaction.3.1. considering legal implications first. This should be read as a general introduction to the legal environment in Poland. The chapter also contains section 2.2. The real state of real estate | 57 . Legal. they form the basis for understanding the most relevant legal and tax implications of investing in real estate in Poland. on the legal background (below) will introduce the reader to certain concepts and terms that may not be commonplace in transactions elsewhere in Europe.9.

establishing of a mortgage) must be executed before a notary public. Polish real estate law provides quite clear and stable rules which allow potential investors to make well-founded decisions about entering into real estate transactions. it constitutes a basis for 58 | Poland. 2. A public credibility warranty of the land and mortgage register is an additional instrument which protects the purchaser against third party claims and guarantees the validity of the title acquired (as long as the purchaser acted in good faith). most real property deeds (sale. Legal titles to real estate The basic source of real property law in Poland is the Civil Code of 23 April 1964 (with many amendments since. 2.1. other transfers.1. Although it does not regulate this branch of law exhaustively.1. Below we present some key information on real estate law in Poland which should be the base for other comments in this chapter. hereinafter referred to as the Civil Code).2. Additionally. Legal background 2. The real state of real estate . there are measures and institutions which enable investors to safely conclude transactions adapted to their needs and expectations. General remarks In general.1. In particular.

this may lead to an increase perpetual usufruct right. easements). see our comments below) admissible only on account of important and transfer or encumber the real estate. The real state of real estate | 59 . for a specific term. Legal and tax aspects of investing in real estate other regulations regarding legal titles • T he perpetual usufruct right is created to real estate and their limitations or for a defined purpose (developing a modifications. however. when the economic purpose of the perpetual usufruct of property does not Ownership (prawo własności) is the require letting the land for a longer period. allowed. in principle for a period of 99 years. the perpetual usufruct right may Perpetual usufruct (użytkowanie wieczyste) be created by contract. transferred to third parties The most common limitations result from or encumbered (i. it is registered in the land and mortgage register. Other issues involving the The perpetual usufruct right is similar to establishment and transfer of the perpetual the ownership. and obligation in the annual fees or even termination rights. If the perpetual The most common legal titles to real estate usufructuary is in breach of these in Poland are the ownership right. Polish law also provides several limited property rights such as easements and • T he perpetual usufruct right is created usufruct. The right.e. broadest right to real estate in Poland. a shorter period of no less than 40 years is equivalent to a freehold. such as lease. the provisions. or the local authority) remains the owner of however. the perpetual usufruct right and the socioeconomic purpose of the right. The holder of the right may apply ownership conveys the right to possess and for extending the term of the perpetual use real estate for an unlimited period of usufruct for a further period of 40 to 99 time (with the exception of ownership of years following the lapse of the initial any buildings connected with the perpetual period. Right of perpetual usufruct Currently. social interest. mortgage. rental income. e. Ownership right However. As a rule. project or conducting a specific activity) set out in the contract. of the contract by the common court. The State-owned land or by a local authority winning bidder signs a notarial deed with in relation to the authority-owned land. which generally is a right of use the real estate which may requires putting the land up for a tender be granted by the State in relation to the (there are several exceptions provided). The ownership right may be limited by statutory law. construction law and zoning master plans The holder of the perpetual usufruct right adopted by local authorities (municipalities). there are several usufruct are accordingly governed by crucial differences: Poland.g. tenancy or leasing. enjoys the right to use the real property and to draw benefits from it. In the owner of the real estate establishing either case the respective entity (the State the right of perpetual usufruct. Refusal to prolong the time limit is usufruct right. does not come into existence until the land. principles of community life Once created. can be inherited.

is a right strictly connected with the right of perpetual usufruct and. If the buildings are erected after the perpetual usufructuaries (in particular perpetual usufruct right is established. legal persons or entrepreneurs perpetual usufruct right expires. the right of perpetual usufruct. the holder are not entitled to demand the conversion of the right is entitled to a reimbursement in the simplified administrative procedure corresponding to the current market value under judgment of the Constitutional of the buildings and other improvements Tribunal (dated 10 March 2015). may demand perpetual usufruct property. before a If the real estate transferred for perpetual common court. The rate of 3% is the basic rate (dzierżawa). in consequence. The perpetual usufructuary is obliged to pay to the owner a one-off initial fee which Leases and Tenancies amounts from 15% to 25% of the total market value of the land and then an annual Polish law distinguishes between two fee of up to 3% of the total market value of types of leases: lease (najem) and tenancy the land. Under a lease 60 | Poland. committee and. The real state of real estate . they natural persons).3%. The ownership of real estate. if unsuccessful.Legal and tax aspects of investing in real estate the regulations regarding the transfer of strictly listed in the legal provisions. and agricultural property. They may legally implemented on the land that is the only pursue the buyout under a standard subject of the perpetual usufruct right. Separate ownership of the be converted into ownership in a simplified buildings due to the perpetual usufructuary administrative procedure. Leases are used mainly for provided by the law. the ownership of of ownership and the value of the perpetual buildings may be transferred only with usufruct. In particular. However. The conversion is subject to a fee which is the buildings share the legal “lot” of equal to the difference between the value the land. other rates (0. subject to certain also become the perpetual usufructuary’s conditions. value of the land as established for the purpose of calculating the annual fee The contract under which the land is is subject to indexation (not more than transferred for perpetual usufruct may lay once for three years). Once the In general. The perpetual down potential limitations on the use of real usufructuary has the right to question property and indicate the manner in which a new valuation before the local appeal the real estate is to be used. Conversion of the perpetual usufruct into the buildings and other constructions ownership in general requires consent of erected thereon are sold to the an owner of a real estate (the State or a perpetual usufructuary in addition to the local authority) and is executed in a civil law establishment of the perpetual usufruct sale agreement (buyout). however. 1%. 2%) applied to the Tenancies are used especially for industrial real estate assigned for specific purposes. certain right. usufruct is a piece of developed land. there can be commercial and residential premises. sale agreement.

which are • o perating leasing. that an easement be established in return for an appropriate remuneration. (encumbered property) for the benefit provides for the lessee additional right to of another piece of real estate (master collect profits from the real estate. executed in Poland: • p ersonal easements. Legal and tax aspects of investing in real estate agreement. property at the end of the leasing term. Depending on the content of an easement deed. of easements: The user. i. by installments. however. A transfer of the ownership of a real utility provider may ask the land owner to estate at the end of the leasing term establish an easement over his land in order may be stipulated directly in the leasing to install (and then operate and maintain) agreement. steam leasing according to his requirements and or other facilities. or the holder of the acquire the real estate from a specified encumbered property may be restricted in transferor on the terms and conditions the exercise of his own rights for the benefit set forth in that contract and to give it of the master property (passive easement). however. the utility provider may demand the period of using the leasehold. The tenancy contract. The real state of real estate | 61 .e.g. and are transferred together with the property (whether that encumbered or There are two types of leasing that can be the master property). undertakes to (active easement). utility easement which leasehold is an asset of the lessee who may be established for the benefit of makes depreciation write-offs and the entrepreneurs being utility providers. over to the user for use or for use and Polish law distinguishes between two types collection of profits for a specified period. electricity cables. limited use of the encumbered property who is an entrepreneur. Poland. The Civil Code also lists a separate category • fi nancial leasing. in which case the of easement.transferrable makes depreciation write-offs and the (nor can the right to exercise them be lessee has an option to purchase the transferred). installations serving The lessee should choose the type of to supply and to channel liquids. the lessor undertakes to hand Easements over the real property for the lessee’s use Easements (służebności) over land for a fixed or non-fixed term. property). If the real estate owner needs with respect to tax settlements and refuses. in which case the established for the benefit of a natural leasehold is an asset of the lessor who person and are non. undertakes to pay the financing party. and the lessee are limited property rights which may undertakes to pay the lessor an agreed be granted over a piece of real estate rent. the financing party. e. the holder of the Leasing master property may be entitled to a By a leasing contract. which are monetary remuneration equal to at least established for the benefit of the owner the remuneration or the price at which the or perpetual usufructuary of the land financing party acquired the real estate. a • g round easements. gas.

district courts and provide information on the legal status of real estate. Usufruct (użytkowanie) of real estate is mortgages. The real state of real estate . physical features and the use of the land and buildings. that register (ewidencja gruntów i budynków). perpetual usufruct the usufruct may be limited by specified and limited property rights such as profits being excluded. to commercial premises. In such a case. As a death (or liquidation. whose main purpose is register. exercised for ten years. In particular. the potential investor should verify whether such rights are not being executed by carrying out an on-site Land and Mortgage Register inspection. cooperative member’s right by a contract. Usufruct is non-transferable. the location of parcels of land. is effective erga omnes a rule. however.g. if one of the rights is 2. Moreover. real estate may be encumbered Usufruct is similar to tenancy. the ownership Usufruct status of land. Usufruct is created apartment. there are also regulations parties to an agreement. 62 | Poland. family house in a residential cooperative. as a limited limited property right. registrations take place at the request entities).e. Usufruct. regardless of the dates of their to register titles and encumbrances over establishment. it benefits from priority against Poland: the land and mortgage register the right which is not entered in the (księga wieczysta). easements are not always disclosed in the the main purpose of which is to describe the land and mortgage register. a usufruct expires if not of the party concerned. or to a designated cooperative member’s right to an part of the real estate.1. The scope of register: ownership. yet its legal with more than one easement or other nature is different.3. as property right. encumbrances on the land. real estate and the land and buildings It should be noted. right to a single- strictly connected with the usufructuary. i. In consequence. e. which specify priority in a different manner. Real property registers entered in the land and mortgage There are two types of land registers in register. during a due diligence Land and mortgage registers are kept by review.Legal and tax aspects of investing in real estate In practice. a right that arose later cannot be (it is effective in respect of third parties) exercised to the detriment of the earlier and tenancy is effective only between the right. in the case of legal rule. easement and usufruct. a limited property right which allows its holder to use the real estate and collect The following real estate rights are benefits similar to those to which the registered in the land and mortgage ownership holder is entitled. so the right expires on the usufructuary’s mortgage. however.

if a purchaser acquires a the register should prove his/her legal property in good faith from a non-owner interest if the demanded extract includes registered as owner. the party intending to inspect consequence. deeds. bad faith. are concerned. their owners and legal status of real estate.g. the acquisition is personal data. However. the content of other natural persons and corporate bodies the register prevails in favor of the person holding the land. updated data on land. The real state of real estate | 63 . there be any inconsistency between the buildings and premises. In Additionally. only parties with a legal interest may inspect them. courts. fees are collected as the holder of the right and entitled for disseminated data sets and distributed according to the public credibility warranty extracts from the registers and directories of the land and mortgage register (rękojmia as well as for copies of cadastral maps. court decisions) complaint against a court decision. Legal and tax aspects of investing in real estate Land and mortgage registers are publicly The public credibility warranty does not available for review by anybody (even those confer protection on gratuitous dispositions with no legal interest) and may be also or those made in favor of the acquirer in reviewed on-line. His only recourse is buildings register. buildings and premises. an excerpt from the land and of ownership or another real property right mortgage register is the key document that with the protection which is provided in the should be obtained and analyzed before a case of land and mortgage registers held by decision to acquire real estate is made. Poland. who has acquired the right of ownership Information on land. The public credibility valid and the true owner cannot render warranty does not apply to the land and the transfer invalid. filing an application or lodging a (including maps. via IT system. wiary publicznej ksiąg wieczystych). the register does an indemnity claim against the vendor. In not provide the person acquiring the right consequence. starostas of the poviats (or presidents of Entry of a right in the land and mortgage towns with the rights of a poviat) and is a register is presumed to reflect the actual uniform collection for the whole country legal status of the real estate. buildings and premises or another property right by performing is available to the public and commonly an act in law with a person duly registered accessible. It is also excluded by an entry in the land and mortgage register concerning As far as land and mortgage register files e. Legal interest is interpreted quite narrowly and comes down Land and Buildings Register to those parties whose rights are registered The land and buildings register is kept by in a given register. Should of systematized. hence.

The SPV may operate both as a partnership and as a company. they may acquire rights and incur obligations. can be divided into two groups: partnerships and companies. The real state of real estate .1 General remarks Further to the Polish Commercial Companies Code of 15 September 2000 (hereinafter referred to as the Commercial Companies Code) the legal entities. Investing in real property is generally carried through specially created entities – so called special purpose vehicles (SPV).2.2. a limited partnership and a partnership limited by shares. partners in a partnership take full responsibility for the partnership’s liabilities (subsidiary responsibility) and (ii) partnerships are not legal persons. There are two main differences between them: (i) generally. however. an entity organized in any form legally accepted in Poland may serve as an SPV. Consequently. 2. Investment vehicles and structures 2. referred to therein. we would like to present three that are the most commonly used by the investors: a limited liability company. Polish legal regulations do not impose any specific legal form for such an entity. 64 | Poland. Among all the legal forms of organizing the entity provided for in the Commercial Companies Code.

• by entering into a joint-venture. it is a party to specific rights and obligations. remain a parent company for company). Legal and tax aspects of investing in real estate The choice of the legal form for the SPV • i t may be created by one or more will determine the structure under which persons for any purpose allowed by law such an entity will be operating. FIZ) can liability company set up by signing the be used. 2.000 introduce the SPV into its capital structure: (ca. this is always more • l imited liability company is a legal expensive than setting up a new entity. There are numerous value. Poland. EUR 1. The Commercial Companies Code provides For more complex and diversified for an institution of a “company in investments a formula of a closed-end fund organization”. This means. perspective. not liable for the company’s liabilities. including the right of ownership of real estate and other rights.200) and is divided into the SPV may be bought or established by shares of equal or non-equal nominal the foreign investor. or arrange any other structure that their contribution to the share capital of would suit its needs from the legal and tax the company. z ograniczoną odpowiedzialnością) is commonly used as the SPV for real estate It is also possible to register a limited investments or development projects. service firms offering the sale of established • t he share capital can be covered by a companies or partnerships (so-called contribution in-kind.pl/). in general. i. The real state of real estate | 65 .2. Apart from the legal forms mentioned • i t acts through its body. • t he share capital of the company shall There are two ways for an investor to amount to the minimum of PLN 5.2. a foreign/Polish company controlling the • l iability of the shareholders is limited to SPV. “shelf companies”).e. articles of association may acquire rights on its own behalf. The procedure is simplified in The features of the limited liability company comparison to the standard procedure and are set out in the Commercial Companies requires the registration of the company Code. However. Limited liability company incur obligations. liability company with the registry court via the Internet. the members of in Poland and invest in real property: the management board.gov. the most important of them being: through a dedicated website of the Ministry of Justice (https://ems. The foreign (it may not be formed solely by another investor may either be a direct shareholder single-shareholder limited liability in the SPV. the above. are • directly through its branch. sue and be sued even before its registration with the registry A limited liability company (spółka court. a foreign investor may also operate management board.ms. person and as such. that a limited (Fundusz Inwestycyjny Zamknięty. that can be used straight away.

000). being the only shareholder partnership. limited by shares in case of which the for example. It is obviously possible to introduce liabilities of the partnership. during the online registration 2. of the SPVs.Legal and tax aspects of investing in real estate However. The real state of real estate . sue and Foreign Investor Foreign Investor be sued. i. several SPVs established (or purchased) by • the assets of the partnership include the same shareholder in order to divide the any property contributed to the investment risk between them. partnership. setting up a holding company. a simple one requirements (excluding the partnership step structure may be enlarged and involve.e. SPVs Limited partnership A limited partnership (spółka komandytowa) SPVs is a partnership of which at least one partner is liable to the creditors for the obligations of the partnership without limitation (the general partner- komplementariusz) and the liability of at least one partner (the limited partner- komandytariusz) is limited to the value defined in the partnership agreement. depending on the intentions of the investor and bearing in mind possible tax • there are no minimum capital effectiveness of the scheme.3 Partnerships of the limited liability company it is not possible to make an in-kind contribution.000. • although it is not classified as a legal person. following: The SPVs may be set up directly by the • partners act in the name of the foreign investor. a partnership may acquire One step structure with A structure with rights on its own behalf. (bearing in mind the limitations indicated • partners are responsible for the above). which holds the shares 50. minimum share capital amounts to PLN abroad or in Poland. the entire share capital must The main features of partnerships are the therefore be paid in cash. incur obligations. However. including the several SPVs. right of ownership of real estate and diversification gathering several SPVs other rights. In recent years the number of partnerships used for the purposes of investment Hold Co structures significantly grew. hence.2. ca. allowing a holding company. EUR 12. This feature of the limited partnership results in the specific structure that needs 66 | Poland.

It is a common practice that shall be a shareholder (akcjonariusz). partnership in case of which there are whereas an additional limited liability minimum share capital requirements.e. LLC • profit-sharing occurs in groups (general partner) (separately shareholders and general partners). management duties.e. As mentioned PLN 50.g. obligations. Structure with limited partnership The partnership limited by shares is subject to some additional restrictions provided for Foreign Investor by the Commercial Companies Code: (limited partner • in case of in-kind contributions the auditor’s opinion is required. while the shareholder acts like nevertheless it may take specific functions a shareholder in a joint-stock company. i. 2014 partnerships limited by shares are where at least one partner (general partner­ Poland. Most commonly in any other partnership. Rights and obligations komplementariusz) shall bear unlimited in the partnership should be split between liability towards the creditors for obligations two entities (limited partner and general of the partnership and at least one partner partner). depending on the specific the general partner acts like a partner needs of the investor.000 (ca. The real state of real estate | 67 .i. Legal and tax aspects of investing in real estate to be implemented. purpose of which is to conduct a business Due to CIT law changes from 1 January enterprise under its own business name. may be involved. his involvement is purely of a financial nature.e. i.000). also in case of The specific features of this entity results in limited partnerships various structures two kinds of involvement in the partnership. the investor takes the role of the limited Partnership limited by shares is the only partner in order to avoid the full liability. represents however. Tax advantages SPV Till 31 December 2013 both limited partnership and partnership limited by shares were considered transparent for Partnership limited by shares the purposes of corporate income tax and A partnership limited by shares (spółka therefore commonly used as SPVs in real komandytowo-akcyjna) is a partnership the property investments. EUR 12. in the SPV .e. with respect to the structures involving limited liability companies. company is established to serve as a the share capital has to amount to at least general partner in the SPV. the limited liability company will the partnership and takes subsidiary possess a minority position in the SPV and responsibility for the partnership’s shall be a 100% subsidiary of the investor.

Legal and tax aspects of investing in real estate no longer considered tax transparent and Partnerships pay other taxes. real estate tax. (both limited and general) and recognized for corporate income tax purposes on an The table below compares the business and on-going basis at their level (i. and civil law transaction tax. limited taxation aspects of the limited partnerships partnerships are tax transparent).000 PLN minimal share capital NO (ca. taxable withholding tax on interest and royalties revenues and costs generated by the as well as withholding tax on remuneration partnership are allocated to the partners paid to individuals. became corporate income taxpayers. such as VAT. and they may pay withholding taxes (e. The real state of real estate . EUR 1. which has only one partner shareholder itself) can acquire real property YES YES the shareholders/ partners general partner – YES are personally liable for the NO limited partner – NO company’s debt 5. and limited liability companies: Limited liability company Limited partnership possesses legal personality YES NO YES can be established by (NO if to be established by a single shareholder/ NO a LLC.g.200) management board obligatory NO supervisory board voluntary* NO Taxation of income (from 19% 19% exploitation or sale of assets) at the company level at the level of the partners 19% under certain conditions there can be relief for shareholders Taxation of the distribution who are legal persons (based in of income to shareholders Poland or in the EU/ EEA).e. NO / partners Reduced rates for foreign shareholders on the basis of double taxation treaties (depending on the treaty) 68 | Poland. as a tax remitter). In the case of limited partnership.

4.2. Poland. definition of a joint venture. • l imitation of liability vis-à-vis creditors 2.5% Civil law transaction tax on NO on the value of the loan shareholder / partner loans payable by the partnership NO although interest paid to the partner being the lender cannot be Applicability of thin recognized as a tax YES capitalization rules deductible cost of this partner (on the other hand. A detailed analysis is required in • p rofit distributions are not taxed: there each case. it is a useful solution to combine entrepreneurs’ efforts in achieving the • t he ability to offset profits and losses on common goal. interest received constitutes taxable income of this partner) Ability to offset profits and YES NO losses from various projects profits and losses are only in the case of establishing (carried out in separate compensated at the level a tax capital group companies/ partnerships) of partners 19% 19% Taxation in Poland of possible relief for foreign it is not clear whether the sale of shares in the shareholders on the basis the same relief possible company / partnership of double taxation treaties in the case of (depending on the treaty) partnerships The main advantages of using a limited A limited liability company can be partnership in an investment structure are transformed into a limited partnership. Legal and tax aspects of investing in real estate Limited liability company Limited partnership 0. is only one level of taxation. as follows: although such a process may incur taxation in Poland. nevertheless. Joint venture for the limited partner (who is liable only up to the amount agreed by the Polish legal regulations do not provide any partners in the articles of association. The real state of real estate | 69 . called the commendam sum). different projects conducted at the level of the partners.

2. the two entities. holder). Authority (Komisja Nadzoru Finansowego).End contract. as an setting up a new company (the investment investment fund merely forms an asset on such basis is carried through the given base consisting of the payments of the company. The primary ventures are: principle of the FIZ is the fixed number of • gaining access to new markets. titles on every demand of an investor as • p roviding access to cheaper sources of is the case with the open-end investment supply. participation titles (investment certificates) • synergies. The Polish Investment Funds’ activity is The Management Company (Towarzystwo comprehensively regulated by the Act of 27 Funduszy Inwestycyjnych) is a legal entity May 2004 on Investment Funds (hereinafter separate from the Investment Fund. which allocate capital for The Act on the Investment Funds activities implemented jointly by sharing differentiates in general between Open- costs and revenues under a joint venture End Investment Fund and Closed. funds. According to the legal provisions only a According to that Act. The real state of real estate . the partners. the sole object of joint-stock company with its registered the investment fund’s activity is to invest office in Poland holding authorization to the monies acquired from the participants conduct the activities related to creating in shares. In order to subscribe for investment • j oint development and sharing of certificates. duties created by the country of one of shares or real estate. the Board of Investors 2.5 Investment Fund .Legal and tax aspects of investing in real estate The term joint venture may be understood Investment funds differ from regular legal as a cooperation of two entities resulting in entities such as capital companies. the participant has to make technology. as FIZ). 70 | Poland. The FIZ’s bodies are the Management Company. referred to as the Act on Investment Funds). securities. money market investment funds and managing them instruments and other property rights – issued by the Polish Financial Supervision including real property. but rather in discretionary periods of time. a contribution to the FIZ. issued in exchange for contributions made by its participants (investment certificate- • risk diversification. The objectives for the creation of joint FIZ is a legal person. without creating a separate Investment Fund (hereinafter referred to business entity. the • o vercoming barriers and administrative participants may contribute to the FIZ cash. (controlling body) and General Investor’s closed-end fund Meeting. FIZ does not issue participation • achieving economies of scale. Generally. as described before) or it may participants and the assets acquired for the be only a very close cooperation between said payments.

its supervision. certificates which may acquire the real property. however. time-consuming implementation process. it is common even exemption from taxation. of the practice that already existing Management operating and capital gains generated from Companies are engaged to take this the real estate. above may form an interesting investment The Management Company fulfils two alternative. The real state of real estate | 71 . all the damage caused by the failure to perform or improper performance of its The setup of the investment structure duties as regards the management of the should be planned in advance. or by an investor. This may be very basis of the permit issued by the Polish useful in entering in larger. Legal and tax aspects of investing in real estate may be an investment fund management it allows for additional financing for company. a foreign investment fund acts as a founder of the FIZ. primary functions: (i) at the beginning .it Similarly. In such a case an investor makes an In that case flow-through (Polish and agreement with a Management Company. changing tax environment and unstable practice In accordance with the Act on Investment of the Polish tax authorities makes . establishing an FIZ structure has important advantages. This means that the Management the investments to be raised by selling Company carries out its activities on the investment certificates. Nevertheless. the investor only holds tax effective structures for operations on investment certificates in the FIZ and the Polish real estate market that together through this structure invests in particular with the business effectiveness described property. role. long-term real Financial Supervision Authority and under property investments. Foreign Investor b) establishing an FIZ.it Funds. Example of a FIZ structure The above shows that the structure needed to implement FIZ is complex and requires: Management Company a) engaging a Management Company. foreign) partnerships may be used to create Consequently. –However. First of all. the Management Company shall advisable to verify the applicability of the be liable to the participants in the FIZ for tax exemption in each case. if properly A Management Company may be formed implemented may allow the deferral. due to a FIZ and its representation. The use of this structure. (ii) when established in the EU or EEA country the FIZ is established and registered . possibility explicitly). investment FIZ c) establishing the operating companies. SPV Poland.it may be used (the Polish CIT law in force becomes its governing body (represents FIZ from 1 January 2011 provides for such a in transactions with third parties).

or mainly purposes. 1997 on the Property Management 72 | Poland. referred to as PPP) is one of the rising forms of cooperation between public authorities and the private sector. the hereinafter referred to as the Act on selection of the private partner is made Concessions.2. The real state of real estate . hereinafter Law (hereinafter referred to as Public referred to as the Act on Public-Private Procurement Law) subject to provisions Partnership.6 Public-private • r isk division between a public and partnership private partner.with funds to allocate for other public-private partnership. the public such a right together with payment of sector may provide to private investors an amount of money the selection of the the long-term certainty of cash flows from private partner shall be done applying public sources. is established by two acts that regulate the cooperation between • I n other cases. • c ooperation between a public and the provisions of the Act of August 21. The ways of selection between public and private entities. It allows Selection of the private partner for an increase in the efficiency of public The Act on Public-Private Partnership services through the use of private sector basically distinguishes two ways of selecting experience and for the sharing of risk the private partner. of the Act on Public-Private Partnership. the Act on Concessions subject to provisions of the Act on Public-Private In Polish law the legal framework for PPP Partnership. in a way that ensures the maintenance of fair and free competition.Legal and tax aspects of investing in real estate 2. transparency Public-Private Partnership and the Act on and proportionality. depend on the type of the private partner’s remuneration and are as follows: PPP enables a mutual advantage for the public and private sector – for public entities • I f the remuneration of the private it guarantees an additional source of capital partner is represented by the right to and as a consequence provides the public collect benefits from the subject of the sector . Public Procurement Law do not apply. 2004 on Public Procurement Public-Private Partnership. • t he Act of 9 January 2009 on In cases where the Act on Concessions and Concession for Works and Services. If the public partner Concessions are as follows: brings in real estate as its own contribution. On the other hand. as well as the The main similarities between the Act on principles of equal treatment. the selection of the private partner shall be done applying public entities and private partners: the provisions of the Act of January • t he Act of 19 December 2008 on 29. private partner. • p rivate partners receive payments for the service rendered. General remarks • c onstitute a special form of tender Public-private partnership (hereinafter agreements.

exclusively for public finance. for the purpose of achievement of the • in case of concession for services – project goal. the contract may be signed for a longer term. while the • in case of concession for works – public entity commits itself to collaborate 30 years. as a rule. budget expenditures on the safety of public finance. Partnership public and private entities The duration of a concession contract conclude an agreement under which the should take into account the recovery of private partner commits itself to implement the concessionaire’s expenditure incurred the project at an agreed remuneration with reference to the performance of the and to cover in whole or in part the concession and shall be no longer than: expenditures for project implementation. When issuing the consent the right to use the service or such the minister responsible for public finance right with the payment by concession- shall consider the influence of the planned granting authority. The real state of real estate | 73 . or cover them through a third party. which of PPP in a given year is specified in the constitutes in case of: Budget Act. the public entity and the of the concessionaire’s expenditure private partner shall establish a company. Poland. a consent issued by the minister responsible • t he concession for services . own contribution. Financial restrictions The concessionaire under the concession The total joint amount up to which bodies signed with the concession-granting of government administration can contract authority is obliged to perform the subject financial liabilities on the basis of contracts of concession for remuneration. The Act on Concessions specifies the rules and procedures for contracting concessions Implementation of PPP for works or services and the legal Pursuant to the Act on Public-Private protection measures. specified above. a incurred with reference to performance of limited partnership or a partnership limited the concession is longer than the period by shares. • the concession for works – exclusively However. The PPP contract can also provide that for the purpose of its Where the expected time limit of recovery performance. the financing of a the right to use the work or such right project from the State budget to the with the payment by concession- amount exceeding PLN 100 million requires granting authority. in particular by making its 15 years. In 2015 it was PLN one billion. Legal and tax aspects of investing in real estate (hereinafter referred to as the Act on The concession contract – legal Property Management) must be taken into basics account.

2.3. Real estate
financing

2.3.1. Modes of financing the
SPVs / investments
The most important thing in starting
investments, is to provide financing for the
SPVs, so they can operate and acquire real
property.
There are several methods of financing
the company, some funds can be received
from outside, but some may come from
the capital group – e.g. from the parent
company. In many cases both solutions are
possible.

Loan and credit agreement
By loan agreement a lender undertakes
to transfer the ownership of a certain
amount of money or goods to a borrower,
while a borrower undertakes to return
the same amount of money or the same
amount of goods of the same kind and the
same quality. Loans can be granted by any
entity / person and may be relatively freely
regulated by the parties.
A credit agreement is a specific kind of
external financing, which is regulated by
the Banking Law of 29 August 1997 and
can be granted only by banks. By a credit
agreement a bank agrees to provide a
specific amount of money for a specific
purpose and time, and the borrower
agrees to use the credit for its intended
74 | Poland. The real state of real estate

Legal and tax aspects of
investing in real estate

purpose, and pay back the amount of credit several months, market practice is such
along with due reward in the form of bank that banks pay out the amount of the credit
interest. upon receipt of confirmation of filing of the
application for registration.
On the financial market there is a wide
choice of bank credits and their price A mortgage is a very secure solution for the
depends on various factors as: duration, bank, as in the case of the debtor not being
securities available, financial condition able to pay off his debt, the real property
of the borrower. Additionally, banks may may be sold in a public auction and thus,
charge the borrower a preparation fee for the bank may retrieve the whole amount of
all work connected with the preparation of debt.
the credit.
Banks also generally require securities Shareholder’s loan
for the credits. Among others, the most A loan from shareholders has two
popular are: important advantages over the bank loan.
• mortgages; First, it is in general a cheaper solution and
what is more, it does not bare the risk of
• share pledges;
enforcement in case of difficult financial
• asset and bank account pledges; situation of the borrower.
• powers of attorney to bank accounts; It is important to mention the specific
• s ecurity assignments of receivables of rules resulting from art. 14 § 3 of the
the borrower; Commercial Companies Code, which
• submissions to execution; provides that shareholder’s claim resulting
from a loan shall be considered to be his
• subordination agreements. contribution to the company in case of
A mortgage is the common form of declaration of bankruptcy within two years
security required by Polish banks – from the date of the loan agreement.
especially required in real estate financing However, the above does not constitute
transactions. an increase in the share capital of the
company, and the contribution is treated as
Mortgage shall be defined as a right, under
made on the supplementary capital. This
which the lender (creditor) may satisfy his
provision is intended to protect creditors of
claims from the property, regardless who is
the bankrupt company.
the current owner of the property, and with
priority over other personal creditors of the
borrower, whose credits are not secured Bonds
with mortgage. Bonds can be issued by a joint-stock
A mortgage becomes effective after company, a limited liability company and
entering in the Land and Mortgage Register. a partnership limited by shares. Bonds
The entry takes effect at the date of filing, can be defined as securities, which oblige
so even though the registration may take the issuer (the company) to give certain

Poland. The real state of real estate | 75

Legal and tax aspects of
investing in real estate

benefits in cash or in kind to the bondholder condition of that entity. Additionally, if the
(the buyer of the bonds). Companies can issuer operates for more than a year, it is
issue registered or bearer bonds. required to provide financial statements
prepared as at the balance sheet date, no
The advantage of this form of financing
earlier than 15 months before the date of
is the ability to fairly freely determine the
the publication of the terms of issuing the
benefits that are associated with bonds.
bonds, along with the auditor’s opinion.
The construction of the security does not
have to be limited to a simple financial
benefit in the form of repayment of the Promissory notes
bonds plus interest representing an income In order to obtain financing SPVs may issue
of the bondholder. While issuing bonds, promissory notes.
the company is free to formulate the
gratification to be provided to bondholders, A promissory note may include a deferred
such as the possibility of participating in payment date. It should have a clearly
profits of the company, or the conversion of defined due date, in the form of a calendar
bonds into shares. date. There are exemptions from this rule
– e.g. an ‘a vista’ promissory note - which
The bonds may be distributed on an open provides that the payment is made on
market, in search for an outside financing, demand from the payee or within a certain
or serve as a mode to transfer funds from period after the demand. Additionally, an ‘in
another related company. It should be blanco’ promissory note allows a payee to
noted that there are several companies in fill in (at its own discretion) - the conditions
the real estate sector listed on the Polish of such promissory note (e.g. date of
bonds’ open market. payment) within the scope foreseen by a
In the case of SPVs which aim to obtain mutual agreement.
financing from the shareholders, the The obligation from the promissory
gratification (a mutual benefit) to the note does not have to be accompanied
parent company as a bondholder will be of by any other legal relationship that it
secondary importance. A practical solution secures. It means that the holder has an
is that if the SPV generate future earnings unquestionable claim from promissory
from real property, bonds could entitle note, even if, for example, promissory
bondholders to participate in the profit. note liability was not based on any other
Due to the high degree of freedom in the particular obligations - such as loans.
framework of this instrument, it is very
recommended as an optimal way to bring Similarly as in the case of the loan
the funds downwards. agreement, the issuer of a promissory
note becomes a debtor. With the use of a
We would like to note, however, that promissory note, SPVs can easily obtain
the issuing of bonds creates additional funds from the parent company in a less
obligations for the bond issuer, related formal, quicker way and easily settle the
to providing data to assess the financial debt in any suitable timeframes.

76 | Poland. The real state of real estate

in proportion to their shares. it would be necessary to amend process of withdrawing the invested capital. This process is associated with either changes in articles of association (a formal mode that requires filing the changes in Additional contributions the articles of association with the National This method of financing is provided by Court Register) or an increase based on the Commercial Companies Code.265 of the companies. both ways lead to an registration) and is time-consuming (e. payments – such a solution is possible These include the fee for changing an entry based on the freedom of contract principle.g. creating new ones. The payments depend on the value of increase and are increase the company’s own funds. It can be carried by increasing Commercial Companies Code). Poland. EUR 60). In fact. and this is certainly beneficial The capital increase is a more formal for the SPV. to additional contributions has to be stipulated in the articles of association A significant drawback of this method (if such articles do not contain such of financing SPVs is relatively difficult provisions. notary fee limited liability company do not affect the for the minutes documenting the capital value of shares in the share capital of the increase and for the preparation of a deed company. To cover the increase of contributions) from the shareholders in a the share capital. EUR 25). a fee for the notification in the Court and Payments of additional contributions in a Economic Monitor (ca. the general obligation such as cash or in-kind. it is worth noting that partnership agreements It should be noted that the share capital can also oblige the partners to additional increase needs some additional expenses. but the advantage of this form of financing is the ability to contribute in various forms. Legal and tax aspects of investing in real estate Increase of share capital This is carried through the reduction of Raising capital is a common way of financing share capital (Articles 263 . and therefore the share capital containing a statement of acquisition of of the company remains unchanged after shares in the full amount (notary fees the additional contributions. includes three months for objection to the reduction that can be brought by creditors). but it the current provisions of the articles of is applicable only to the limited liability association (informal mode). the funds may be paid in specific amount paid by the shareholders cash or in-kind contributions can be made. According to the provisions. are thus quite freely allocated for the specific need. which the nominal value of the shares existing or involves again additional costs (notification. in the National Court Register (ca. change the capital structure of the company the articles of association of the company by defining the share capital at a higher may require the payments (additional than current level. The aim is to company. The real state of real estate | 77 . increase of the share capital. which limited by legal provisions). As mentioned above. meeting. The amount and timing of process in comparison to the additional payments is decided by the shareholders’ contributions (referred to below) and loans.

in less than a month from the date of are not only entitled to dividends but also to publication. If the company’s articles of association allow such additional payments Equity financing to be made. the contribution in kind of a business or an provided that funds gathered from those organized part thereof) is a taxable event contributions are no longer required to for the company making the contribution. which means the right to control the company and that this instrument is relatively flexible. even if the profits can be distributed to shareholders company’s financial statements show a in the form of dividends. Payments liability company where no shares are can be used for different purposes. the purposes. may be differently regulated by the Shares in the company give shareholders articles of association. A transaction tax with certain exceptions resolution of the shareholder’s meeting for restructuring and reorganization taken by an absolute majority of votes is transactions. subject to civil law transaction tax. and not earlier than one income tax rate. Pursuant to the provisions of the Generally. contrary company. and later repaid to the When a Polish company is financed shareholders. The real state of real estate . Equity financing to create an actual obligation for the is generally subject to a 0. a contribution in kind (except for additional contributions may be refunded.3. and issued in exchange. then receipt and repayment through equity. the funds required for the is not subject to income taxation.Legal and tax aspects of investing in real estate them. Rules on the refund taxation under the relevant tax treaty. Additional contributions are always made in Additional payments are contributions cash and cannot be fulfilled by providing the made by the shareholder(s) of a limited company with non-cash benefits. 78 | Poland. announcing foreign entities may be exempt from Polish the intended refund. that additional to corporate income tax. proportion to their shareholdings. a financial loss and its level of equity is lower than the nominal value of its issued 2. or even without the need to a share of any proceeds upon liquidation in announce the refund. it is not enough the shares in the company. However. The income of the company to the provisions of the Commercial generated through its operations is subject Companies Code. the capital (share premium) should not be actual obligation arises. Tax implications share capital. Usually these payments the applicable regulations do not contain are made when the company has made restrictions in this regard. cover the losses reported in the financial and is subject to the standard corporate statements. for Polish corporate income tax Commercial Companies Code.5% civil law shareholders to make contributions. Contributions to a reserve required. Any after-tax contribution may be refunded. the right to financial benefits from the Shareholders may in fact decide. currently 19%. month after notice in writing. The shareholders loss. as otherwise additional contributions investment are received in exchange for are not possible). However.2. After this step is complete.

The entity or in earning revenue by that entity treaties or unilateral tax rules in most which is then paid as a dividend. in transferring the is also subject to income tax in the country ownership of shares of a dividend paying where the recipient is a tax resident. Legal and tax aspects of investing in real estate Compensation for making the additional In addition. after the actual following the month in which the tax was dividend payment. such interest should from other EEA countries and Switzerland be treated as a non-tax deductible cost. it is considered tax rates under Poland’s various tax that a transaction or a legal action does treaties). This of a company resident for tax purposes in tax must be withheld by the company Switzerland. in particular. If the condition to hold withheld. The 19% rate can be reduced the amount of shares for an uninterrupted (to a lower percentage) if the recipient period of two years is not satisfied. a transaction. where determine in which country the recipient the main or one of the main purposes was of the dividends should be located in order benefitting from these tax exemptions to reduce or avoid the international double and such transactions or legal actions do taxation of dividends (see the Appendix at not reflect the economic reality. since the implementation of payments may be paid to the shareholders the EU Parent–Subsidiary Directive. to 0% by virtue of a treaty and the dividend but results. This condition can be before the seventh day of the month also met prospectively. i. When paid. an in the form of interest payable by the exemption on dividends paid to companies company. details of Poland. application of similar provisions. Double taxation occurs when the not reflect the economic reality if it is not Polish withholding tax cannot be reduced performed for justified economic reasons. are just as many ways in which the Polish withholding tax can be reduced. For the the end of this book for a list of withholding purpose of the above rule. or a legal action of the investment should be carried out to or a series of related legal actions. Subsidiary Directive based tax exemption if dividends are connected with an Appropriate tax planning in the initial phase agreement. applies.e. The real state of real estate | 79 . Poland with the penalty interest for late payment has concluded many tax treaties and there will be due. and paid to the tax office at least two years. Usually the Dividends paid (or received) as of 1 January treaty withholding tax rates on dividends 2016 would not benefit from the EU Parent- vary between 5% and 15%. is a tax resident in a country with which withholding tax (as a rule at 19%) together Poland has concluded a tax treaty. As there is countries provide a credit system to avoid no well-grounded practice regarding actual such double taxation. This is provided that the entity receiving the dividend is taxed in another Taxation of dividends EEA country (or in Switzerland) on its worldwide income (and is not subject to Dividends distributed by a Polish company tax exemption on its total income) and has to a foreign owner are generally subject held or will hold at least 10% (in the case to a 19% withholding tax in Poland. at least 25%) of the shares in distributing the dividend on the dividend the Polish company paying the dividend for payment date.

by the additional requirement is that the Polish end of 2014 the approach of the Polish entity paying dividends should also hold tax authorities was that. An As regards liquidation proceeds.Legal and tax aspects of investing in real estate each structure should be analyzed carefully Standard. even though liquidation is under Polish law. It means that as a rule such redemption will be subject to tax in It is up to the company paying the dividend Poland. voluntary redemption of shares to determine and address potential issues is subject to the same tax treatment as with taxation of dividends. rate. upon shares redemption or in kind dividend payment) the value of liability Redemption of shares and settled in such a way constitutes a taxable liquidation distributions revenue of the paying entity. withholding tax rate or exemption. This applies respectively also to look through entities. A certificate issued dividends and is subject to the applicable by a foreign local tax office confirming the withholding tax (taking into consideration tax residence of the foreign shareholder the appropriate tax treaty) or withholding receiving dividend payments from Poland tax exemption based on the Polish CIT must be obtained by the Polish company law provisions implementing the Parent– in order to allow application of the lower Subsidiary Directive. (e. a written confirmation from the recipient the entity that ceases to exist should that the latter does not benefit from tax be taxed as if it disposed assets which exemption on its worldwide income. The redemption of shares and the return Liquidation proceeds are also likely to share of equity to shareholders are permitted this treatment. e. are transferred to the shareholder. The Polish Other than voluntary redemption of shares company distributing the dividend can be (compulsory redemption of shares) as well held liable for mistakes. provisions explicitly state that in case of in non-creditable withholding tax is levied on kind remuneration for settling the liability dividends at the rate of 19%. 80 | Poland. The formal procedure is not explicitly mentioned in this provision.g. time–consuming and usually takes several months.g. This Dividends paid between companies which approach was not shared by the courts are resident in Poland for tax purposes though. unless relevant double tax treaty to determine the applicable withholding tax provides for tax exemption. The real state of real estate . If the above conditions are not met. upon liquidation. is received) at least 10% of shares in the dividend paying company for at least two As of 1 January 2015 the Polish CIT years. are exempt from withholding tax provided The similar approach was to be applied to in that the dividend recipient has held or will kind remuneration for redeemed shares or hold (on or after the day when the dividend dividends in kind. disposal of shares. if it applies as liquidation is taxed in the same way as an incorrect tax rate. The Polish withholding tax system is not “a pay and refund system”.

i. outstanding to a foreign lender is subject to a 20% withholding tax (as a rule 20%) together withholding tax.g. period is required) is currently available. cases a minimum 25% stake and 2 year holding period is required). Poland. and subsidiary. be also met prospectively. a certificate confirming recipient does not benefit from the tax exemption on its worldwide income. requirement is that the payer should also As in the case of dividends. a withholding tax exemption on to Polish or foreign VAT (e.e. treaties. If the condition Withholding tax on interest to hold shares for an uninterrupted period Generally. and applicable to interest and royalty payments the tax liability rests with the borrower. An additional corporate income tax of the foreign lender. This rate applies unless with the penalty interest for late payment the relevant tax treaty provides otherwise. Poland transaction tax at the level of 2% of the loan implemented the EU Directive 2003/49/ principal. no civil law transaction tax The 2-year holding period condition can applies. and • fi nancing granted as a part of business between direct sister companies (in all cases activity is recognized as a financial a minimum 25% stake and 2 year holding service specifically exempt from VAT.e. will be due. made between associated companies of different Member States. As a result • l oans recognized as an activity subject of that. in order to hold the recipient’s confirmation that the apply a treaty rate. after the actual interest payment. The real state of real estate | 81 . Under the tax treaties. are made between “qualifying EU entities”. Loans are generally subject to civil law After joining the European Union. the following types of loans purposes of the Directive is to abolish are exempt from taxation: withholding tax imposed by the country • l oans granted by shareholders to a from which payments of interest and limited liability company or joint stock royalties originate when such payments company. payments made between parent and are engaged in credit and financing subsidiary. bank interest payments made between parent loans). therefore. The tax must be paid within 14 EC on the common system of taxation days of the date of the loan agreement. Penalty interest is charged from Please see Appendix for a list of withholding the day following that the day on which the tax rates under Poland’s various tax above period expires. Legal and tax aspects of investing in real estate Debt Financing (Loans): civil law the tax residence of the foreign lender must transaction tax be obtained. interest paid from Poland of 2 years is not satisfied. subsidiary and parent and activities (such as group treasury between direct sister companies (in all companies). • l oans granted by foreign entities which i. it is In order to benefit from that favorable generally stipulated that if withholding tax treatment the payer should hold recipient’s is payable it can be credited against the certificate of tax residence. One of the main Nevertheless. subsidiary and parent.

in accordance shareholders holding jointly not less 82 | Poland. as regards interest paid on loans projects constructed for resale (e.Legal and tax aspects of investing in real estate Tax deductibility of interest paid with “the arm’s length principle”. been significantly amended as of 1 January The cost of such interest should be added 2015. However. or comparable to. other conditions in the loan for tax purposes when actually paid or agreement which are unjustifiable or compounded (added to the principal so unfavorable to the borrower could result that it constitutes a basis for new interest in further tax adjustments.e. interest on loans is deductible In addition. Generally. the sort of not less than 25% of the voting rights financing conditions which non–related in the company or loans (credits) from parties would agree upon. Too high on loans an interest rate could lead to an adjustment of the Polish borrower’s taxable income. accrued interest may not regulations governing the documentation be treated as a tax deductible cost until it is of transactions between related parties.e. In such cases. actually paid or compounded. Careful income assessed. this rule applies respect to which funds were made available only to real estate which is the company’s to the borrower as of 1 January 2015. taxpayers are required to prepare specific In general. it should be possible to treat the transfer pricing documentation or risk interest on loans drawn to acquire shares in paying a 50% rate on any additional taxable a Polish company as tax deductible.g. The real state of real estate . with respect to which funds were made residential projects). It does not apply to Therefore. the new building) in order to According to the transitional provisions new increase the scope of its future depreciation rules apply to interest paid on loans with for tax purposes. always required in all “debt push down” structures. Restrictions on the tax It is important to note that interest accrued deductibility of interest paid on during the development of real estate on loans the part of the loan used to finance that The Polish thin capitalization rules have development is not directly deductible. interest may be treated as tax deductible under the general rules. based available to the borrower before that date – on the practice of the Polish tax authorities old rules apply. however. According to calculation). i. own fixed asset. These conditions should be the company by its shareholder holding same as. to the initial value of the newly developed real estate (i. tax planning is. Old rules The Polish old thin capitalization rules Level of interest restrict the tax deductibility of interest The Polish tax authorities are usually on two types of loans (credits) granted by interested in the conditions of loan certain entities: agreements concluded between related • l oans (credits) granted to the taxpaying parties.

and 160 • d ebt payable to entities holding at least 25% of the voting rights in the above Polish Real Estate mentioned direct shareholders. excluding: • l oans (credits) granted to the taxpaying • c► apital not paid in full. company by another company. • capital formed by a contribution in kind. In both cases “equity” includes the share capital stated in the company’s deed of Poland. which is an intangible asset not subject where the debt to equity ratio (the ratio to depreciation (e. of the shares issued. 25% of the voting rights in each of these companies (“sister company” loans). Corporate For the purposes of the calculation of the Investor debt to equity ratio. Legal and tax aspects of investing in real estate than 25% of the voting rights in the association and equal to the nominal value company (“mother company” loans). of the value of the debt payable to certain entities to the value of the share capital Examples of how the old thin capitalization (see below for details) exceeds 3:1 at the rules work: date of the interest payment. Company • in the case of “sister company” loans: • debt payable to direct shareholder(s) holding at least 25% of the voting Assumption: rights in the interest paying company. The real state of real estate | 83 . Interest on the loans (credits) exceeding the ratio is not Example 1 tax deductible (the term “loans (credits)” also covers bonds and deposits). the debt includes: • in the case of “mother company” loans: • d ► ebt payable to direct shareholder(s) Investment Company 40 holding at least 25% of the voting rights in the interest paying company. goodwill).g. and Polish Real Estate Company ’s (PREC) • debt payable to entities holding Nominal share capital is: 50 at least 25% of the voting rights Debt limit is: 150 in the above mentioned direct Total loans: 200 shareholders. and Part of loans exceeding threshold 50 • debt payable to the entity granting the loan (credit). if the • capital converted from shareholder same shareholder holds not less than loans (credits) and/or related interest.

Corporate 50 Investor Under the new thin capitalization rules. The real state of real estate . Part of loans exceeding threshold 50 As of 1 January 2015. generally interest on all intra-group loans (also those from Example 3 indirectly related entities) may be subject to deductibility restriction. Polish Real Estate Polish For the purposes of these rules. part (calculated based on a proportion) of interest paid on a loan from a related party is not deductible for tax purposes.Legal and tax aspects of investing in real estate Example 2 Loans exceeding threshold 0 For sister company loan: Corporate Investor Total loans 200 40 Part of loans exceeding threshold 50 Investment Investment Company A Company B = minimal 25% voting right relationship 100 60 = loans subject to thin-cap Polish Real Estate = loans qualifying for calculation Company of debt limit Assumption: PREC ’s nominal share capital is 50 New rules Debt limit is 150 The new rules restrict deductibility of interest on a broader range of loans than Total loans 200 the rules in force until the end of 2014. if the value of debt owed to specified related 50 parties exceeds equity (net assets) of Investment Company the borrower (1:1 debt to equity ratio). Total loans 100 84 | Poland. The value Assumption: of equity is further decreased by the value of the share capital that was not actually PREC’s nominal share capital is 50 transferred to this capital or was covered Debt limit is 150 with shareholder’s loans’ receivables For shareholder loan: and intangibles that are not subject to amortization. equity is Company Company determined on the last day of the month 100 preceding the month of interest payment without taking into account revaluation reserve and subordinated loans.

restrictions (only net debt is taken into The value of interest recognized for tax account). Interest not deducted in a given tax The thin-capitalization rules apply to year can be deducted in the following interest on loans granted by Polish and consecutive 5 tax years. directly or indirectly at least 25% of the taxpayers are generally obliged to file voting rights in the borrower. provided that such reporting in paid to both related and unrelated parties. If chosen by the taxpayer.25 percentage point and the calculation is decreased by loans granted tax value of assets within the meaning by the borrower to the entities. loans from of Accounting Act (excluding intangible which would be subject to thin capitalization assets). • loans granted by an entity that holds To be entitled to apply the above rules. including the issuance operating activities (this condition does not of bonds. in PLN denominated in foreign currencies. purposes cannot be higher than the value The definition of a loan covers any form corresponding to 50% of the profit from of debt financing. The real state of real estate | 85 . They cover the decides to use this method it should be following loans: used for at least 3 consecutive tax years. The definition does not cover financial institutions). the National Bank of Poland’s reference Poland. banks and deposits. credits and bank and nonbank concern. 25% of the voting rights in the borrower. Foreign exchange partnership. derivatives. have also a right to opt for a new audited companies can report foreign alternative thin-capitalization calculation exchange gains or losses in accordance with method. However. generally speaking. the conditions concerning the differences accrue also on loan liabilities minimum share (voting rights) are fulfilled. Legal and tax aspects of investing in real estate Debt taken for the debt to equity ratio rate plus 1. • loans granted by one company to Foreign currency financing another company if the same entity As the foreign currency liabilities are holds directly or indirectly at least 25% reported for accounting purposes in PLN. These gains or losses are recognized for tax purposes only when realized. accordance with accounting standards will The recognition of such interest cost for continue for a period of at least three tax tax purposes is limited to the amount of years. i. the accounting standards upon notifying the tax abovementioned method applies to interest authorities. losses) accrue in the accounting books For general partners in a limited joint-stock of the Polish company.e. when the As of 1 January 2015 the taxpayers related liability is paid or set off. of the voting rights in both the lender foreign exchange differences (gains or and the borrower. If a taxpayer foreign qualified entities. regardless of the general partner’s share. relevant notification with the tax authorities • loans granted jointly by entities that not later than till the end of first month of jointly directly or indirectly hold at least their new tax year.

the particulars of the case and the power of each party to negotiate have to be considered while choosing one of these two forms. Acquisition of real estate – asset deal and share deal 2.4. On the other hand. among which an asset deal and a share deal are the two most commonly used. General remarks As many other jurisdictions.4. 2. The real state of real estate . In practice. Polish law provides different methods of acquiring real estate by an investor. this can be the most tax efficient disposal method to use. if the shares are bought 86 | Poland. The interests of the seller and the buyer. In a well–organized corporate structure. From the buyer’s perspective. it is usually more tax efficient to buy the property directly than to buy shares in a company holding the property. The buyer can then depreciate as much as the real market value of the building for tax purposes. Both methods bear various legal and tax consequences which have to be considered in any given case and therefore there is no generally accepted rule when a share deal or an asset deal shall be applicable.1. taxes on capital gains can be entirely avoided or in some cases deferred. if a share transaction is properly structured.

future capital gains made on the disposal of undisclosed liabilities. in comparison to the due diligence The key differences between these two preceding a share deal. the target company). such as real estate to examine the consequences of each and acquire only those parts. Pursuant to the Polish the shares in the share capital of the law. analysis.e. Since in case of this transaction it is not necessary to examine the Definition of a share deal and title to the company’s shares or the asset deal company’s corporate structure. structure. an investor purchases the property itself and at the end 2. an extensive due diligence of will most likely try to negotiate a discount the target company preceding the on the transaction price to eliminate this purchase of shares is required and negative tax aspect. in such transaction.e. Thus. the methods of acquisition concern the assets being acquired (such as real extension and nature of purchased items estate) may require a more detailed and are presented below. tax liabilities). which remain the property of the target such goodwill cannot be amortized for tax company. in an asset deal it is possible to divide out both the legal and tax perspectives. Furthermore. However. Legal and tax aspects of investing in real estate at a higher price than the book value of becomes the owner of the shares and the company’s assets. Legal aspects owns the assets of the target company only. recommendable. the buyer of shares Thus. Since in this transaction an purposes. the Despite the fact that the share deal and due diligence preceding an asset deal asset deal are equally popular. that real estate. Unlike a share deal. Therefore. the purchaser who is registered in the Land and Mortgage Poland. • A share deal is defined as a transaction One of the most significant differences involving acquisition of shares in a between these two types of transactions company as a result of which the is the guarantee of the validity of the buyer purchases the whole or a part of purchased title. in an asset deal. The real state of real estate | 87 . for instance real estate) for accounting purposes. Unfortunately. it also acquires the risk related deferred tax exposure with respect to any to the liabilities of this company (e. a company owning investor purchases shares in the target real estate with a low book value has a company. in the asset deal the investor’s company (i.2. their object is generally shorter and less extensive and manner of conducting are different.4. and certain elements. goodwill paid in does not obtain any direct rights to return for the shares can be recognized the assets (i. acquisition of the land from a title-holder Thus.g. The purpose of this chapter is to outline • A n asset deal is where the purchaser the main features of these two types of real acquires all or some of the assets of estate transaction from the company.

the legal title accordance with the binding provisions to the purchased property or shares 88 | Poland. part of in the share purchase agreement. representations and warranties in which the validity of the company’s title relating to all aspects of the company’s to the property is supported by the seller’s activity: in particular tax. one does • T he seller’s representations and not act in good faith if knew.e. Such letter usually less extensive than in a share is a good solution for parties who intend purchase agreement. corporate and contractual included in the share purchase agreement. development has been carried out in Pursuant to the Polish law. Usually. in order legal regulation of this issue. to conduct multi-stage negotiations and • I n an asset deal. to clearly state the intentions. This applies only when the relevant permits are valid. It is recommended that the sale agreement Representations and warranties provides for specific instruments In order to secure the purchaser’s interest supporting the enforceability of the extensive representations. the seller’s to those who would like to agree on minor representations and warranties concern. but also extensive apply to the purchase under a share deal. as well as all issues that have to the statement confirming that the be discussed. goals to achieve during negotiations and the key Please note that representations. the parties warranties and accompanying indemnities sign a letter of intent prior to signing the included in the asset sale agreement are real estate purchase agreement. matters. purchaser acted in good faith (i. the validity of the seller’s parties may determine the time frame of title to the real estate. negotiations. Such a guarantee does not regarding real estate. employment. representations and warranties that are accounting. In market practice. The scope of warranties and representations as well as detailed legal consequences of their breach have to be Types of agreements regulated in the sale agreement in details There is a number of documents related as Polish law does not provide for a specific to both transactions. details of the transaction. principles of the transaction. in particular. completion. warranties and indemnities securing the representations related indemnities should be included and warranties. that the legal status of the property include the representations and is different than the one resulting from warranties typical for an asset deal the register). The real state of real estate . This is the purchase price is retained in an escrow usually one of the most important parts account or a bank guarantee is obtained of the agreement subject to extensive from the seller. the information the negotiations and the moment of their regarding encumbrances (if any).Legal and tax aspects of investing in real estate Register guarantees the validity of the of law and technical plans and that purchased title. or should have warranties in a share deal usually known. In such a case.

property management agreements. it is necessary conditions. Consequently. the property- regulates all issues related to the real related rights and obligations (such as property or shares. the property-related does not determine the transfer of the rights and obligations are not automatically ownership rights to the purchased property. the real estate or shares may be effected by execution of an unconditional agreement executing two separate agreements. Thus. transferred as a result of the sale Nevertheless. each transfer of property contracts and contracts of insurance. transferred if there is an entry in the Land necessary to obtain the consent of the and Mortgage Register made. the obtain any direct rights to the assets as subject of the sale and the purchase price). obligation is merely informative and In the asset deal. in general. Legal and tax aspects of investing in real estate of a company holding the real estate is the above entry determines the date of the transferred on the basis of an agreement transfer. in some cases purchase of a needs to be disclaimed. i. preliminary agreement need to be fulfilled without undertaking any additional actions. agreement must include the essential In the share deal the purchaser does not content of the final agreement (i. preliminary agreement followed by a final agreement. is registered. pursuant to warranty claims under construction the Polish law. certain property rights. However. such agreement.e. executed in the relevant form.e. such takes place. In case agreement is not sufficient to transfer the of licenses. decisions etc. the function of such assignment is required. it should be perpetual usufruct right and the date of Poland. The Parties usually conclude to obtain various types of consents or such an agreement once a letter of intent permits regarding the transfer of the rights has been drawn up and before the final related to the property. all conditions foreseen by a agreement may be executed immediately. leases. in general. Please note that. as the mortgage register permits) remain with the corporate entity system in Poland aims to have all properties holding the real estate and no formal registered. The transfer of the real estate must be In case when circumstances surrounding unconditional which means that before it the transaction are straightforward. the lack of which purchase agreement has been executed. In that case. The real state of real estate | 89 . or the obligation to satisfy these conditions However. the preliminary transaction. the other party of each contract. The transaction structured in Transfer of the property-related two separate stages is especially relevant when there is a need to obtain consents rights for the transaction or to fulfill certain In many transactions. a completes the transaction. In case of contracts as for as the perpetual usufruct right can only be the formal assignment it is. these remain the property of the target In practice. may affect the legal effect of the entire In order to be valid. the preliminary agreement company.

This means that the and obligations related to the real ability to assign the property-related rights estate.Legal and tax aspects of investing in real estate analyzed case by case what actions have e) other matters such as in case of to be undertaken in order to transfer them an asset deal the transfer of rights to the purchaser. the Considering the above. the asset agreement. the sale and the price. The requirements regarding form. can be governed by Polish law only. the method of resolving a or assuming the obligations is examined dispute etc. which may prevent or restrict transferability. while such Formalities requirement is not necessary for • Purchase Agreement content the execution of the share purchase Pursuant to the Polish law. it can be executed in a payment (including down payment foreign language. Such requirement does not apply d) representations. as well as the price commercial registry court that will adjustment mechanism). The share purchase purchase agreement and the share agreement requires the notarial purchase agreement should describe certification of the signatures of the at least such elements as the object of parties. a mortgage over the property. register the transfer of shares may c) security instruments (to be request a sworn translation of such determined by the parties. regulated activity as all permits required for its operation stay in the company. which can be governed by a foreign 90 | Poland. the form of a notarial deed but just notarial certification of signatures b) the price and mechanism of and. The real state of real estate . In practice.g. therefore. the Polish if any. agreement. since the real agreements are complex and provide estate purchase agreement must for the following main information: be executed in a form of a notarial a) the detailed description of the deed. the bank guarantee). However. it must be also concluded in property or the shares that are Polish. a The real estate purchase agreement registered pledge over the shares. e. The form of a notarial deed is required for the execution of a real estate purchase agreement. in a share deal a subject of the transaction (the sale purchase agreement does not require object). warranties and to the share purchase agreement indemnities. a share deal is a type of agreement depend on whether we transaction usually considered by investors deal with an asset or a share deal when the target company conducts transaction. By contrast. language and governing law of the Therefore. in light of specific regulations • Other requirements or contractual provisions. individually.

each signature. excluding the cases where the control is to be taken over by a competitor or a Merger control participant of the capital group to which the Due diligence review preceding any asset competitors of the to-be-taken undertaking or share deal should answer the question belong. but not exceeding PLN to be taken did not exceed in the territory 10. capital group. when the turnover of depending on the value of the the undertaking over which the control is transaction. whether a notification of the transaction to the Office of Competition and Consumer The pre-emption rights Protection is required. The real state of real estate | 91 . which may then exercise • t he combined turnover of undertakings its preemptive right within one month of participating in the concentration in receiving the conditional agreement. are met. the Polish antitrust law provides Property purchase agreement for certain exceptions from the obligation requires the notarial deed form. The fee of Poland in any of the two financial years for the certification of signatures is preceding the notification. The right permit of the Office of Competition and of pre-emption is a right to acquire the Consumer Protection is issued. Should such It may happen that the public authorities notification be required. notification exceeds the equivalent of EUR 50 million. If such a property is • t he combined worldwide turnover sold without observing this right. agreement will send a copy of it to the or local authority. Where the real to the Office of Competition and Consumer estate is subject to a right of pre-emption. property before it can be purchased by A notification on the planned transaction any other person or entity. • Costs However. the concentration applies to whether the legislation governing merger undertakings participating in the same control will be applicable. the closing of the have a statutory preemptive right to real transaction must be suspended until the estate which is about to be sold.000 for each agreement. concentration in the financial year preceding the year of the notification The notary executing the conditional exceeds the equivalent of EUR 1 billion. Legal and tax aspects of investing in real estate law (provided that conclusion of the the territory of Poland in the financial agreement is connected with the law year preceding the year of the of at least two different countries). in particular. the sale is of undertakings participating in the considered to be null and void. it Protection is required if any of the following may only be sold to a third party under the conditions is met: condition that the beneficiary of that right does not exercise it. If Poland. the equivalent much lower and does not exceed the of EUR 10 million. in particular. the concentration arises amount of PLN 300 for certification of as an effect of insolvency proceedings. of notification even if the above conditions which is subject to a notarial fee.

does not pose a threat to the State’s After 1 May 2016. of shares in a company being owner of taking up shares in Polish entities).Legal and tax aspects of investing in real estate the public authority does not exercise its acquire real estate in Poland may apply for preemptive right within that period. for example the buyer has land is pending. European Economic Area entities controlled by a foreigner) are or Switzerland (or Polish entities controlled required to obtain a special permit of the by such) – provided that a real estate to be Minister of Internal Affairs for acquiring acquired is not agricultural or forest land. the obligation to obtain defense. the actual circumstances pertinent to the decision have changed. foreigners (or Polish European Union. The permit is Acquisition of such real estate. • introducing a pre-emption right of an The acquisition of real estate without a individual farmer whose land neighbours permit is invalid. merger with a Polish entity. a new circumstances confirming his bonds with legislation restricting trade of agricultural Poland (i. The permit is valid for two limitations include in particular: years from the day of issuance. coming into force as The Minister’s decision concerning real of 1 May 2016. also requires the abovementioned estate or perpetual usufruct on the basis entities to obtain the permit of the Minister of any legal event (e. the a promise of the permit. in-kind of Internal Affairs. The real state of real estate . until 1 May necessary when acquiring ownership of real 2016. a real estate in Poland. During this which effects the unconditional transfer of period a permit cannot be refused unless the title to the real estate. public order the permit for acquisition of agricultural and is not contrary to the social policy or forest land by entities from EU. purchase. acquiring of agricultural estate acquisition should be issued within land by any entity (regardless of origin) will one month (two months in particularly be subject to certain restrictions. Switzerland will be abolished. acquisition contribution. EEA or and public health considerations. A foreigner intending to with an agricultural real estate being sold. Polish origins or is conducting business or agricultural activities in the territory Under the new law on shaping the of Poland under the Polish law). provided that: by such) do not require obtaining the permit • a foreigner’s acquisition of real estate of the Minister of Internal Affairs. agricultural or forest land by entities from European Union.g. national security. 92 | Poland. The promise of parties can conclude the final agreement. However. The new difficult cases). European Economic Area The permit is issued upon a written request or Switzerland (or Polish entities controlled of a foreigner. the permit is valid for one year. Restrictions in acquiring of real The above restrictions do not pertain estate to acquiring real estate by entities from As a general rule. • the foreigner proves that there are In connection with the above. agricultural system.e.

agricultural land owned by the State • direct indication of legal actions giving (Agricultural Property Agency) by grounds for Agricultural Property companies. a new or transformation of a current owner legislation. land. Nevertheless. is taking (perpetual usufructuary) of the land. limitations: This new legislation. the moratorium does not pertain to agricultural land of the area below 1 Acquisition of real estate from ha. (residing in the same commune where in practice. to purchase shares in companies owning an agricultural land (excluding shares in Proposed legislation introduces without public companies). court will be entitled to allow the sale. • general prohibition on sale or An investor interested in acquiring real transferring possession of an estate from the State or local authorities should ask the authorities for information Poland. Such type of Chairman of the Agricultural Property acquisition is considered to be safe and an Agency for sale of an agricultural land attractive alternative to acquisition of real to persons other than individual farmers estate from private owners. merger. Legal and tax aspects of investing in real estate • decreasing an area of an agricultural agricultural land within 10 years from its land to which the Polish Agricultural purchase. the land may also be sold upon public entities obtaining Minister of Agriculture permit. emption or buyout right from 5 ha to • granting Agricultural Property Agency 1 ha. under specific requirements such as an obligation pain of invalidity. which in fact may be considered as • granting the Agricultural Property excluding the agricultural land from trade Agency a pre-emption and buyout right as such. • Agricultural Property Agency’s right to Proposed draft of the new law provides for buy of an agricultural land in case of major restrictions in sale of agricultural partners change in partnerships. however not yet • 5 years moratorium on sale of adopted. division be effective as of 1 May 2016. substituting the act. acquisition of real estate from the land is located for at least 5 years). sale. is planned to become the effective agricultural land owned by the State law as of 1 May 2016. to dispose the land via public tenders. shape. In Poland. a pre-emption and buyout right to • limiting the right to acquire an agricultural land regardless of the area. agricultural system is adopted and is to in-kind contribution. (Agricultural Property Agency).g. or to the State. Agency to exercise the pre-emption or Although the new law on shaping the buyout right which include e. public entities is subject to additional closest persons. real estate is often acquired from • an obligation to obtain a permit of the the State or local authorities. in ill-fated reasons a common Property Agency is entitled to a pre. The real state of real estate | 93 .

Tax implications sale.4. and only the “capital gain” is taxed at the rate of 19%. As the value of the land is not subject As mentioned above. the to purchase such real estate on the spot. it is not possible a replacement provision. Unfortunately. The revenue from the sale of real • the supply of a building. Taxable revenues are reduced by the the course of its first occupation or prior net book value of the property. from the market value of the real estate. etc. Therefore. financial by the State or local authorities may be costs accrued till the purchase. Effectively. in which cases the supply of buildings. Costs incurred by the buyer for the With only a few exceptions provided by acquisition of real estate: purchase price. if the price differs made within two years of the first substantially and without a justified reason occupation. Adjustments trigger not or infrastructure within the context of the only a higher tax burden but also penalty performance of VAT-able activities (subject interest. Asset deal or parts of buildings or infrastructure is The revenues generated on the sale of generally VAT exempt. the law (e. real estate being sold to its transaction costs including advisory. However. infrastructure or part of a building unrelated entities. civil perpetual usufructuary). property (a share deal). the revenue may be assessed by the tax infrastructure or parts of buildings or authorities according to the market value. as corporate seller cannot defer taxation of a there is a special procedure of selling real capital gain. it is then important to either through a direct sale of the property determine the value of the land and (an asset deal) or indirectly through a sale the value of any buildings or structure of the shares in the company owning the separately. 94 | Poland. are recognized as tax deductible costs through depreciation write-offs or upon 2. These two types of transactions are afforded different VAT on the acquisition of real treatment by the Polish tax regulations.g. estate held in public entities’ possession.. The real state of real estate . real estate held law transaction tax – if applicable. after a the initial value of the real estate and lengthy procedure is completed. except for: real estate are subject to the standard • the supply of a building.3. infrastructure estate must be valued at the price set in the or part of a building or infrastructure sale contract. form disposed by way of public tender. to it. infrastructure taxation rules of Polish corporate income or part of a building or infrastructure in tax. infrastructure.Legal and tax aspects of investing in real estate on the contemplated property to be The Polish tax system does not include acquired. This transaction price adjustment may be “First occupation” means handing over a applied to transactions between related and building. infrastructure are generally subject to VAT. real estate can be sold to depreciation. estate The supply of buildings.

in which case. office of the purchaser. infrastructure or part of a building or infrastructure YES EXEMPTION The supply of buildings. and Did the supplier have the right to deduct the input VAT in NO EXEMPTION relation to the improvement • before the day of supply they submit the expenses? appropriate joint statement to the tax YES Had the improved building. The real state of real estate | 95 . and • the seller did not incur improvement An exception to the above rule is when an expenses on which he had right to RPU is acquired for the first time from the deduct VAT. development purposes is subject to 23% The diagram below outlines VAT rules on VAT (supply of agricultural land is as a rule the taxation of the supply of buildings. or such expenses did State or local authority. Legal and tax aspects of investing in real estate to VAT or VAT exempt) to the first acquirer Is the supply of the building. is subject to 23% VAT. the improved real estate was used The supply of ownership title / RPU to for taxable activities for no less than undeveloped land qualified as land for 5 years). the supply of residential buildings and separate Poland. input VAT. even the building. or course of the first occupation or prior to it? part of a building or infrastructure? • improvement (if the expenses incurred YES YES for the improvement constituted at least Did the supplier have the right to deduct input VAT in relation 30% of the initial value) TAXATION YES to the building. infrastructure or part of a or infrastructure? NO building or infrastructure. the supply of real estate infrastructure. However. exempt from VAT). the VAT treatment of ownership exempt (no option to tax allowed) if: title to land or a perpetual usufruct (RPU) over land follows the VAT treatment of the • the seller was not entitled to deduct buildings developed on the land. infrastructure NO EXEMPTION exemption and charge VAT if: or part of a building or infrastructure? • both buyer and seller are VAT YES registered. infrastructure or been used to execute taxable activities for at least 5 years? parts of buildings or infrastructure which NO should be subject to VAT (i. infrastructure or part of though the buildings developed on the land a building or infrastructure (unless may be exempt from VAT. infrastructure or TAXATION • initial completion. the not exceed 30% of the initial value of RPU is always subject to 23% VAT. infrastructure or part of a building of that building. supply in the TAXATION course of first occupation or within two years of the first occupation) must be VAT Generally. infrastructure or parts of buildings or If subject to VAT. Did a period shorter than two years elapse between or user. after the: infrastructure or part of a building or infrastructure the point of first occupation EXEMPTION WITH AN NO and the supply of the NO being carried out in the OPTION OF building.e. Did the supplier incur improvement expenses higher Taxpayers may choose not to apply the than 30% of the initial value of the building.

exceeds 150 m2. the month following the month in which the goods were delivered or the services were If business activities are partly exempt. The real state of real estate . In the case of tangible or the rate appropriate for a particular item intangible assets subject to depreciation for (2% for land. from VAT: these institutions have no (or limited) output VAT and therefore they Starting 1 January 2014. The applicable rate is of the taxed supplies to the total value of 2% of the market value of the real estate. the transaction falls outside the made in the previous year. the amount of deductions is adjusted or part thereof will be subject to civil law to the actual percentage calculated for transaction tax payable by the buyer at the whole year. the proportion is or part of its business is sold as a going calculated based on the volume of supplies concern. or VAT exempt sales should be effected in it is subject to civil law transaction tax line with the proportion of the net value payable by the buyer. In such a case only lease of the commercial real estate). constitutes an additional cost of the Calculation of the percentage of input VAT transaction and is non-recoverable. If this part exceeding the thresholds is subject to is the case. the legal case underlying the transaction. the rendered. the percentage of property. financial institutions property. The assets of the business end. Input the part of residential building and/or VAT will not be recoverable if the company apartment which fits within the above limits performs or intends to perform activities benefits from the 8% VAT rate. 1% for intangibles. certain financial activities apartment but constituting a separate legal performed by banks. recovery of any input VAT which cannot be matched directly either to VAT-able sales If the supply of real estate is VAT exempt. whereas the in the future which are VAT exempt.g. At the year scope of VAT. can be subject to a standard 23% and insurance companies are exempt VAT. Depending on initial tax basis of the real estate. If the business of the Polish company During a calendar year. except for part of residential buildings Input VAT is recoverable if the company whose usable floor space exceeds 300 m2 performs or intends to perform activities and apartments whose usable floor space in the future which are subject to VAT (e. The invoice should be issued by activities (in certain cases there may be a the seller no later than until the 15th day of limited recovery available). buildings and other tangible tax calculation purposes. all supplies (a so called pro rata recovery). including input VAT which may be deducted is subject any goodwill that would crystallize on to adjustments over the period of 5 or even such transfer). as a rule. to be deducted is necessary only if it is not 96 | Poland.Legal and tax aspects of investing in real estate apartments is subject to a reduced 8% Recoverability of input VAT VAT. Civil law transaction tax 10 years (in the case of real estate). sale of a parking space sold jointly with the For example. VAT are not entitled to refunds or any other tax point arises in the month of delivery kind of recovery of input VAT incurred in of goods or rendering the services to the the course of their VAT exempt financial purchaser. the input VAT will increase the a standard 23% VAT rate.

shortened to 25 days at a taxpayer’s request if the input VAT to be refunded As of 1 January 2016 taxpayers also need resulted from invoices that have been paid to take into account so called preliminary in full. therefore. In VAT to be reclaimable). in such a case the period for the The recovered input VAT also has to be refund is extended to 180 days. (as a rule 150 days). a bank guarantee is invoice documenting the expense incurred provided (in which case the refund must be is not settled within the specified deadlines made within 60 days). some countries capital gains on shares are exempt from taxation. most tax treaties concluded by Poland in the month in which the services were the right to impose taxes on the sale of rendered to.e. however. However. the country where the shareholder is a tax recovered earlier than in the period in which resident.e. In such cases Polish income tax the taxpayer receives the respective invoice rules are not applicable and the fiscal rules (prepayment invoices do not fall under this of the country in which the shareholder is rule: they must be paid in order for input a tax resident govern the transaction. Additional sanctions may apply if no adjustment is made (i. unless a adjusted if the liability resulting from the form of security.g. or the goods were acquired shares in corporate entities is allocated to by the purchaser). Under goods or services – the tax point arose (i. The right to recover input VAT arises in the the applicable tax treaty influences the tax period when – with respect to the acquired implications of such a transaction. additional tax liability up to 30% of tax Share deal resulting from the not settled invoices. The real state of real estate | 97 . the period for which the refund is claimed. the submission of the application for the the profit on the share transaction should refund (the VAT return) on condition that not be taxed again. A capital gain on the sale of shares is which has not been accordingly adjusted). In international taxation the taxpayer performed VAT-able supply in terminology this exemption is known as the the period for which the refund is claimed. e. The rationale behind this exemption is that the taxation of capital Direct refund of input VAT gains on shares constitutes double taxation: A direct refund of any surplus input VAT the profit within the company is taxed using incurred should be made within 60 days of the normal income tax rate and. Date of input VAT recovery If the selling party is a foreign shareholder. subject to Polish corporate income tax at the standard rate of 19%. pro-rata that limits input VAT recovery on purchases. if linked both with the economic It is possible to get a refund of input VAT activity of the taxpayer and other activities even if VAT-able supplies are not made in not related with business operations. Participation Exemption. Legal and tax aspects of investing in real estate possible to match input VAT with taxed Please note that this deadline can be activities or exempt activities directly. It cannot be. Some countries Poland.

parties to the transaction are resident for should be arranged. Therefore. where a investment structure.g.g. exploitation. France. in the course of business activity (rather Nevertheless. and potential capital gain is Germany and – following recent changes kept as low as possible. purchase price and • interest income should be reported as notary public fees) may be recognized as tax taxable income in a jurisdiction with a deductible costs upon the sale of shares. it may be be considered when designing the most classified as a VAT exempt financial service. Consequently. a structure shares in a company holding mainly real involving more than two jurisdictions is estate assets should be regarded as a sale used to optimize the overall tax position. efficient structure: However. and that each share transaction is treated as being made investment project is unique.also Luxembourg double taxation. of real estate. acquire shares (e. However. it will still be subject to civil law transaction tax. International tax planning that used to be a preferred jurisdiction for should determine the final structure of holding structures) provide that a sale of the investment.Legal and tax aspects of investing in real estate limit this Participation Exemption to capital when incurred (in certain cases recognition gains on share transactions involving over time may occur). seeking to avoid of Polish tax treaties . foreign investments are structured in such a way that the Significant part of Polish tax treaties (e. given the specific circumstances. the following points should than as a one– off transaction). • interest payable in respect of any debt financing of the investment should be Costs which must be incurred in order to fully tax deductible. Other countries enable the Participation Exemption to be Cross-border structure applicable to transactions involving the shares of foreign companies as well. This is irrespective of where jurisdictions will help to determine what the transaction takes place or where the structure. Investigating the tax treaties and (on the fair market value of shares) payable the applicable rules in the different relevant by the buyer. The tax treaties The sale of shares in the Polish company concluded by Poland should prevent double is subject to a 1% civil law transaction tax taxation. Commonly. The real state of real estate . overall level of taxation of the financing. it is fair to tax purposes. income earned The tax treatment of all the relevant legal on the sale of shares in the Polish company transactions involved in a Polish real estate will be taxed in Poland (the so called Real project differs according to the other Estate Clause). Sweden. domestic shares only. Typically. Denmark. 98 | Poland. with Spain. A share transaction is not say that there is no typical cross–border subject to Polish VAT. relatively modest tax rate. Other costs indirectly connected with • the exploitation and operational costs of acquisition of shares such as financing costs the real estate should be tax deductible may be recognized as tax deductible costs to the largest extent possible. jurisdiction(s) involved.

or indirect shareholding (for an uninterrupted period of at least Addressing these points will help to design 30 days) of at least 25% shares or and implement a tailor–made structure. a foreign company seated in a tax c) at least one of the sources of heaven (as officially blacklisted by the passive income (listed in point b) Polish Ministry of Finance) or is not subject to tax. a foreign company having its seat or by at least 25% than the Polish place of management in the country statutory CIT rate (now 19%) in the other than mentioned in point 1). 1. 25% voting rights or a 25% stake in Additionally. particular double tax treaty. with CFCs country of residence (unless which: Poland.: 2015 CFC (“Controlled Foreign Company”) rules. the cross border investments should • dividends and other income from be each time carefully examined and sharing profits of legal persons properly structured also from the business • disposal of shares. in possible. bearing in mind the general profits of the CFC. anti avoidance regulation that is considered b) at least 50% of annual revenues to be introduced to the Polish tax of the CFC consist of a passive regulations and introduced as of 1 January income. a foreign company which jointly fulfills possible or should be exempt from the following conditions: taxation. or should be taxed at the lowest rate 3. Legal and tax aspects of investing in real estate • profits from the exploitation of real a) Poland has not concluded an estate should be taxed at the lowest rate international agreement.e. securities or guarantees • copyrights or intellectual CFC Rules property rights – including The recently implemented (from January disposal of those rights 2015) CIT regulations regarding CFC define • disposal or exercise of rights CFC as: from derivatives. The real state of real estate | 99 . of loans. • being a basis for requesting tax • revenues from the future sale of real information from tax authorities estate or the shares of a company of that country. • after–tax profits should be easily or distributed. is tax exempt or is subject to tax at a lower rate 2. i. • all strategies for the deferral of the tax a) the Polish taxpayer has a direct payment date should be explored. receivables perspective to ensure their effectiveness • interest or benefits from all types from the tax point of view. b) EU has not concluded an • Polish withholding tax should be international agreement reduced as much as possible.

business operations in this state. which is subject to taxation particular state. on its total income in one of the EU / The Polish companies are obliged to hold EEA Member States. or assets • the CFC carries out actual business Polish tax regulations in some cases may operations outside of the EU or EEA provide an opportunity to increase the Member States in which it is subject initial tax basis of assets. or • the CFC revenues in a tax year are Step-up of initial tax basis of below EUR 250 000. carries out actual registers of the CFC companies. based on which the Polish tax CFC provisions should not apply in the case authorities may request information where: from the tax authorities of that • the CFC. between Poland or EU and a respective state. which provides a to tax on its total income and its tax shield (by increasing the ability to make net income does not exceed 10% of tax depreciation write-offs and to minimize revenues earned from the actual taxable capital gains upon sale). The real state of real estate .Legal and tax aspects of investing in real estate the tax exemption results from of legal basis resulting from the agreement the Parent Subsidiary Directive). 100 | Poland. Careful tax business operations in this state – analysis is always required before carrying subject to the condition that there is a out such a transaction.

2. The real state of real estate | 101 . For this reason. Regulations on land development may influence the shape of the planned building.1 Land development issues Land development issues are important for real estate investors. currently only a part of the territory of Poland is covered with zoning master plans. it grants authorization to the relevant local authorities to develop and Poland. Development and construction 2. all zoning master plans adopted before 1 January 1995 expired as of 1 January 2004. In particular. as well as due to the complex procedure for adopting a zoning master plan.5. As a result of the introduction of the Zoning Act of 27 March 2003 (hereinafter referred to as the Zoning Act). Legal background Land development issues represent one of the main difficulties in the real estate investment process in Poland.1.5. as they determine the possible method of investing in a given area. mostly within the boundaries of bigger cities. but sometimes they also prevent the investor from the investment.5.1 Legal aspects 2. The Zoning Act sets out the principles for the land development process.

without them. The two main zoning acts which covers the whole territory of the determining land development within a relevant commune.). As an internal However. a zoning study does not bind the zoning master plan is of higher investors but only the local authorities importance. Therefore. commune council and is binding for third as a rule. In particular. the investor may good source of information for the investor apply for a decision on land development on the future directions of a given area’s and management conditions (hereinafter development. document. The real state of real estate . whether a zoning decision has as the draft zoning master plan is subject been issued for the real property in to “public consultation” with the parties question. • whether the provisions of the zoning master plan or zoning decision allow for The provisions of the zoning master plan the implementation of their investment are crucial for investors. The procedure for adopting a zoning master • in the event there is no zoning master plan is rather complex and time consuming plan. The Zoning Act Zoning study also sets forth the procedure under which A zoning study is an internal document zoning acts are to be adopted by these issued by each municipality (commune). regarding the distance of a building from the plot’s border or the height 102 | Poland. Zoning master plans may not be binds the local authorities only. either a zoning master plan or Zoning master plan a zoning decision are required to start the The zoning master plan is adopted by the development of the real property. and concerned as well as opinions issued by the relevant administrative bodies. A zoning study provides given municipality (commune) are the the background/guidelines for drafting zoning study and the zoning master plan.Legal and tax aspects of investing in real estate manage spatial policy. from investors’ perspective. Where a building permit is required for an investment. referred to as the zoning decision). since. a zoning master plan. building purposes. Each zoning master plan determines the manner of development of the territory Therefore. while the zoning study plans. forest. In the case contrary to the assumptions of a zoning where no zoning master plan has been study. authorities. it it is crucial for investors to verify: determines the designation of plots (land • whether the real property in question use – agricultural. in particular. is covered by a zoning master plan (or etc. development conditions and types of whether such a plan will be adopted facilities which can be located on the plots. no building permit may be issued parties (investors) as an act of local law. covered by that plan. development of the plots covered by such a plan must comply with its provisions. as the planned plans. as it determines their rights which design and adopt zoning master and obligations. soon). zoning studies may be a adopted for a given area. before buying the real property.

Legal and tax aspects of investing in real estate of a building. sometimes investors start An application for a zoning decision may be a procedure of amending the zoning master filed with the relevant authority even when plan. the plot must such a decision before deciding on the be covered either by a zoning master plan investment. zoning decisions related for construction purposes. Zoning decision This means that investors may use a In the case where no zoning master plan decision issued for the seller of a real has been adopted for the given area. which may prove to be rather time the applicant does not hold any title to the consuming. Sometimes the provisions already been issued for the real property of a zoning master plan may render the in question. Moreover. in particular utilities. Therefore. The procedure or mayor in bigger cities) which allows an for issuing zoning decisions includes investor to start the development process performance of a zoning analysis by the on the site. not happen if a final building permit has environmental protection and sewage Poland. it can be said that a zoning decision substitutes a Building permit zoning master plan for an investor). Therefore. building permit before the zoning master plan is adopted. A building permit is an administrative A zoning decision is issued by the governing decision issued by a local authority (starosta authority of the commune. local authority’s architecture department The documents attached by the investor and it may. or by a zoning decision (therefore. prior to investment planning surface exceeding 2. large retail units with a sale real property. the decision once again after acquiring the which sets out all the required conditions real property (the investor only applies for for the development of that area. take even up to to the application for a building permit several months. as they do not have to apply for investor may apply for a zoning decision. roads. Before the transfer of such a decision to himself). land in question. a declaration If a zoning master plan is being adopted for of having legal title to use the real property a real property. the to this area expire if the provisions of the application must also enclose approvals of zoning master plan differ from those of the local authorities responsible for local the zoning decision. to be able to implement their investment plans. the building process is started on the given Investors may also apply themselves for plot under a building permit. in particular. A zoning decision may be transferred to third parties.000 m2 can only the investor should monitor the stage of be constructed if a zoning master plan works related to the zoning master plan and providing for retail development has been should learn if it is possible to acquire a final adopted for a given area. therefore. However. this shall infrastructure. there is no zoning master plan for a given Moreover. in the case where development of the given plot impossible. The real state of real estate | 103 . an property. should include.

the building or structure to confirm that all construction works have been performed in As a general rule. The real state of real estate . the use of a building or structure after its completion Environmental decision must be preceded requires either notifying the construction by the environmental impact assessment supervisory authorities that construction proceeding (which includes preparation works have been completed or acquiring a of environmental impact assessment permit for use. Depending on the individual case. However. report) in case of projects that always have significant impact on the environment In the case where only a notification (i. buildings of a particular is required.Legal and tax aspects of investing in real estate treatment. 104 | Poland.a. mentioned regulations may result in a fine. The granting of a permit for as well as with the regulations governing use is preceded by a technical inspection of technical conditions for the development. on which the permit became final or if construction works have been discontinued Occupying a building in breach of the above- for more than three years. the however generally to minor construction investments are divided into two groups: works or developing some of residential (single family) buildings. Construction of certain structures Environmental issues which are listed in the Building Law of 7 The building process has many July 1994 (hereinafter referred to as the environmental aspects that must be taken Building Law) may be commenced upon a into account. from The notification procedure pertains the environmental law point of view. Not all construction works require a building permit. The Polish law provides notification sent to the relevant authorities that an environmental decision must if no objections have been raised by them be obtained prior to obtaining a zoning within 30 days of the notification date. decision and a building permit for the given project. • projects that always have significant impact on the environment. under the general rule the size etc. parking lots. a building permit expires compliance with the terms and conditions either if construction works have not been of the building permit as well as technical started within three years of the date requirements. be granted if the construction design is the building may be occupied only after consistent with the assumptions of the the decision granting the permit for use zoning master plan or zoning decision becomes final. Usage of the building • projects that may have significant impact on the environment.). The building permit will only In cases where a permit for use is required. the environmental investor may occupy and use the building or impact assessment proceeding may be structure if no objection has been raised by also ordered by the authority issuing the authorities within 21 days of the date of the environmental decision in relation to notification. Pursuant to the Polish law.

As a result. EU member states have decided to the parties very often to use international adopt legislation the main purpose of which standards for construction works contracts. increasing energy usage efficiency. The Civil Code includes provisions which establish the legal framework for Environmental decision may be transferred construction works contracts. The energy performance certificate does not only inform the owner of the building/ Pursuant to the Polish law.1.5. Polish law in certain circumstances allows a broad access to Legal framework for construction the environmental impact assessment proceeding to non-governmental works contracts environmental protection organizations. submit comments and recommendations to the proceeding. circumstances) at the stage of issuing a building permit. concentrates exceeding 250 m2. The provisions of the effect of the planned investment on law determine the cases in which energy the environment (i. on the ways to prevent and minimize the effects of the planned project. land and air performance certificates should be issued. Environmental impact assessment should be obtained in case the property proceeding. Legal and tax aspects of investing in real estate projects that may have significant impact is to limit emission of greenhouse gases by on the environment. beyond the identification of is to be sold or leased and also for public specific impacts that the proposed project utility buildings with usable floor space may have on the environment. The real state of real estate | 105 . energy performance certificates fauna).2 Construction issues Moreover. inter alia by establishing the stage of issuing the environmental energy performance certification systems decision. Poland. enable contracting parties to structure the construction works contracts in a way that Energy efficiency addresses their particular business needs. water. 2. it may also be repeated (in certain for buildings and premises. certificates should determine the amount of energy that must be used Environmental impact assessment is a in order to satisfy the relevant needs of a legal instrument that allows to determine given building/premises. a number of regulations regarding Despite of the fact that environmental energy efficiency have been introduced impact assessment is carried out at into the Polish law. In implementing their pro-environmental Such a flexible legal framework allows policy. In general.e. authorities premises about the energy usage involved must inform the general public about and the related costs but may also the environmental impact assessment positively influence the value of the building proceeding and allow the general public to as being “environmentally friendly”. Most of (as well as the building permit issued on the those provisions are general in nature and basis of a zoning decision). quality as well as impact on flora and In practice.

payment to the subcontractor. a more detailed analysis In the case where the investor has approved should be performed with respect to the subcontract between the general contractual clauses regarding statutory contractor and the subcontractor. The above the investor’s risk of a double payment mentioned statutory warranty period of five (to the general contractor and to the years applies also in the construction works subcontractor). a letter of credit or a bank’s approved. The investor the matter of dismissing or approving the may satisfy the general contractor’s claim subcontract within 14 days of its receipt. a contract. However.Legal and tax aspects of investing in real estate including the popular FIDIC forms. the warranty periods. the statutory contractor presents a confirmation of warranty period for acquired real estates. such a subcontract payment guarantee may be raised at any 106 | Poland. Therefore. which must always be contracts. There are including buildings is five years from the also some other methods of securing property‘s hand-over date. by issuing a payment guarantee in the If no response is given by the investor. Upon being to the general contractor. signed between the general contractor and not all the provisions of international the subcontractor is unenforceable against standards for construction works contracts the investor. adjusted to the business requirements of given investment. we present the key legal regulations in this The parties must not change this rule in areas. Below of the remuneration to the subcontractor. Under this provided with the draft subcontract. The real state of real estate . form of a bank guarantee. the obligation a general contractor is entitled investor reviews it and decides whether to a statutory claim against the investor for the subcontract should be dismissed or a payment guarantee up to the maximum approved. an insurance the subcontract is deemed to have been guarantee. contracts often include a clause under which the investor is not obliged to pay the remuneration to Statutory warranty periods the general contractor unless the general Under the Polish law. comply with the requirements of the Civil Code and the Building Law. The statutory claim for a dismissed a subcontract. Liability towards subcontractors In particular. signing construction works contracts is the such a subcontract should be approved obligation to grant a payment guarantee by the investor in writing. In the case where an investor has suretyship. Approval of a contract with a subcontractor Contractor’s payment guarantee Before a subcontract is concluded by the One of the inconveniences for investors general contractor with a subcontractor. The investor should respond in amount of the contract value. contracts with and investor is jointly and severally liable with liability towards subcontractors as well as the general contractor for the payment contractor’s payment guarantees.

in particular when they regard Act is to ensure that public contracts are the possibility of entering modifications to awarded while applying equal treatment to the construction design or transferring the all entities taking part in tender proceedings copyright to other entities. A construction design is a formal was obliged to implement regulations requirement for obtaining a building permit governing public procurement proceedings. many of the infrastructural investments developed on the Polish Construction design contracts market will be carried out under public contracts. this reason. as well as to ensure impartiality and objectivity of the final decision. have billions of euros at their disposal to The ones that are most commonly applied be spent on development. For works contract. as one of the EU Member States. competitive rules and procedures for It is worth mentioning that a contract for awarding public contracts to the suppliers architectural services may include various of works and services as well as to provide restrictions with regard to the copyright or measures for supervision over the public the use of the design. The be crucial for the investment development key objective of the Public Procurement process. Such restrictions may authorities awarding public contracts. which is still writing during the term of the construction not very well developed in Poland. Public procurement contracts Procedure General overview Under the Polish public procurement Thanks to a number of EU funding regulations there are numerous different programs every year Polish authorities procedures for awarding public contracts. One of the key elements of the building process is drawing up a construction Poland. Legal and tax aspects of investing in real estate time and can be extended to include the infrastructural projects. design. may either transfer partnership and licenses for construction the copyright to the construction design works and services. for most of building investments. The Poland. The real state of real estate | 107 . in particular road value of any additional works agreed in and railway infrastructure. Under The provisions of EU directives on public the Polish law a construction design must procurement were implemented to the be drawn up and signed by a certified Public Procurement Law. who takes responsibility for the the legal framework for this matter in technical aspects of the construction. The Public Procurement Law is architect should prepare a design under a supplemented by additional legal acts contract for architectural services which. part of this funding will be designated for Both procedures must be followed by a Poland. A considerable are open tendering and limited tendering. which constitutes architect. to the investor or provide the investor with The main goal of public procurement the right to use the construction design for regulations is to establish clear and the purposes of the relevant investment. which relate in particular to public-private depending on its scope.

and are recognised as tax deductible cost through depreciation write-offs or upon A similar course of action should be sale. tenderers important tax is VAT. such as experience. request for quotations Costs related to construction process and or electronic auction can only be applied accrued prior to putting the assets into under specific circumstances stipulated in use form the initial value of the real estate the binding law. The standard rate draft their proposals and submit them to of VAT in Poland is 23%. entities the completion of the investment project interested in being awarded a public concerned. In the general rules. After of publishing a notice also provides non. The obligation perform the contracted work. applied to the above main types of the public procurement procedure. pre-qualification phase the awarding party sets out the requirements / criteria to VAT and the construction process be met by the tenderers. they submit a tender which shall the appeal procedure is quite commonly then be evaluated by ranking. The real state of real estate .2. Notice on contract performs with tender requirements by referring the aim of providing proper implementation to its competencies. meaning that entities familiarize However. if they are is a possibility of appealing against the interested in submitting tenders in such decision of the awarding party. Tax implications Other public procurement procedures such as competitive dialogue. which often results in delays in Under limited tendering procedure. Based on the During the construction process. contract submit requests for participating in the tender and the awarding party decides which bidders may submit their proposals. A reduced VAT the awarding party. In practice. single source procurement. Each of Costs related to future operation / them is comprised of pre-qualification.5.Legal and tax aspects of investing in real estate public notice. with whom the public contract is to be signed. of the rule of equal treatment in the very knowledge and financial capacity to beginning of the procedure. negotiated costs procedure without publication. reviewing all submitted proposals the confidentiality and transparency of the awarding party selects the best tenderer applied public contract systems. 2. open tendering is a simple procedure. exploitation of the assets should be submission of proposals and selection recognized for tax purposes based on of the winning tenderer phases. negotiated Tax treatment of the construction procedure with publication. In general. the most specific requirements / criteria. In the proposal each rate of 8% applies to the construction of tenderer demonstrates its compliance 108 | Poland. procedure. used by the tenderers who lost a public contract. this is not necessarily the end of themselves with the information in the public procurement process as there the notice and in SETC and.

In such cases only connected with real estate include construction of the part of the residential construction works. (resulting from purchase invoices).3. specific same month in which the output VAT on rules need to be observed to ensure the importation of services was recognized recoverability of input VAT paid during the (which means that the company suffers no construction process. services of architects building and/or apartment. but no Such a deduction may be made in the output VAT is incurred. However.e. which is within and firms providing on-site supervision the above limits. This implies that the foreign Polish VAT. As input VAT under the general rules. for part of residential buildings where However.4. This VAT is calculated rendered to a VAT taxpayer (or a legal based on the customs value of the goods person not being a VAT taxpayer) occur Poland.e. Rules this case the real estate company) must of VAT recovery and refunds are presented self–assess the VAT due on the basis of in section 2. Under the general rule. service is Poland. The real state of real estate | 109 . This can construction process the typical situation is then be declared by the recipient as input that the company has to pay high input VAT VAT and be deducted from its output VAT. it is essential that the input VAT VAT on his invoice. during the the reverse charge mechanism. deducted from the output VAT that the The recipient of the services can recover investor has to pay to the tax authorities the VAT paid to the service provider as as a result of his business activities. the Polish recipient (in paid is recovered during this process. the construction process usually takes a If services are deemed to be rendered in considerable period of time and requires Poland and the foreign service supplier the availability of substantial financial does not register and account for Polish resources. Services of foreign contractors Taxes due on imported goods The place of the supply of services (i. benefits from 8% VAT rate. i. in Poland. services customs procedure). the thresholds is subject to standard 23% If the place of supply of a particular VAT rate. and the services of real estate agents and whereas construction of the part exceeding property valuers. Therefore. This input VAT could be company will itself be liable for Polish VAT. services connected with real the usable floor space exceeds 300 m2 estate are generally taxed where the real and apartments where the usable floor estate is located. the Imported goods are always subject to place in which services are deemed to be import VAT when they cross the EU border rendered and should be taxed accordingly) (or in the EU destination country when depends on the nature of a particular the goods are transported under a special service. Services space exceeds 150 m2. Legal and tax aspects of investing in real estate residential houses/apartments except where the service recipient is located. it is possible for a foreign Purchases the investor needs to make construction company to register in Poland during construction will typically include as a VAT–payer. adverse cash flow effect).

Such a transaction once the duration of the construction is classified as an intra–Community works exceeds a certain period of time. Taxation of a foreign construction Please note that if the activities of a foreign company company in Poland extend significantly beyond a single contract.Legal and tax aspects of investing in real estate increased by the customs due. Standard rates and tax equipment and materials. If the construction period takes self– assessed tax may be treated as input longer. the work is subject to Polish income tax. tax treaty which Poland has concluded with the country in which the foreign company The regulations concerning imports do not is based. It provided that the acquirer is in possession should be remembered that in such cases of a purchase invoice or will obtain it within the permanent establishment is deemed 3 months. It is possible Poland directly by the foreign entity. to the customs office and thereafter reclaimed (this mechanism is sometimes Whether or not the given foreign referred to as “postponed accounting for construction company has a permanent VAT”). At the same time created. Setting up a a foreign construction company to do branch will most likely lead to the creation business through a Polish company. in Poland the VAT rate is 23%. If the company is obliged to self–assess VAT on work is finished within 12 months. a construction site apply if goods are transported from another becomes a permanent establishment EU Member State. construction work can be performed in 110 | Poland. The real state of real estate . In general. then a permanent establishment is VAT and deducted from output VAT in recognized and the income derived from the same month in which it was incurred. Poland is indeed allowed Import VAT can be settled without the need to tax this income at a rate of 19% if the for an upfront cash payment through the activities of the foreign company constitute VAT return rather than being paid directly a permanent establishment in Poland. rules are applicable to determine the tax due. the company may In some cases it is not necessary for be required to set up a branch. acquisition and is subject to VAT. The of a permanent establishment in Poland. to exist from the start of the construction No excise tax is due on typical construction activities in Poland. This rule applies only to importers establishment is determined by the relevant using the simplified customs procedure. then the acquired goods at the rate appropriate no permanent establishment has been for them (usually 23%). tax on the revenues generated from the construction work. In this to offset this input VAT against output VAT case the question arises as to whether the in accordance with the general VAT rules. foreign company is subject to Polish income Typically. The Usually this period is 12 months.

6. 2.6.regulated in articles 693 to 709 of the Civil Code. which gives them an opportunity to modify the statutory types and provisions of the civil contract.6. residential etc. • Leasing of real estate (leasing nieruchomości) . Lease agreement (najem) Under the lease agreement the lessor grants to the lessee the right to occupy premises (office. the below are the most common for the Polish real estate sector: • Lease (najem) – regulated in articles 659 to 692 of the Civil Code.1.2. parties of the contract may benefit from the principle of freedom of contracts.regulated in articles 709(1) to 709(18) of the Civil Code.6. The real state of real estate | 111 . Legal aspects 2. • Tenancy (dzierżawa) .1. Introduction According to the Civil Code.1. Among all types of property exploitation agreements.) in Poland. there are some mandatory provisions and limitations. • Property management (zarządzanie nieruchomościami) . which have to be considered by the parties. Operation and exploitation 2. However.1.regulated in the Act on Property Management.2.

Legal and tax aspects of investing in real estate exchange for the payment of rent. the more strict provisions may practice. he is there are certain restrictions. In practice. The lease not obliged to restore it. lease agreement concluded for a period the lessor may – after the expiry of the longer than thirty years is deemed to have lease term. which the lessor is not responsible. The lessee is obliged to pay rent Subletting and disposal of the within the agreed time. is. If the due date is leased property not fixed in the agreement.for the whole lease third party for free of charge use or sublet 112 | Poland. In period. either demand been concluded for an indefinite period that the previous condition be restored or of time after the thirty years’ period has pay the lessee a sum corresponding to the passed. After period of time. unless the lease agreement an indefinite period of time. Duration Maintenance and expenditures The duration of a lease agreement may be settlement definite or indefinite. improvement value at the time of return. nevertheless in case of later than on the tenth day of the month. The real state of real estate . In case of a term. The lease agreement The lessor should hand over the property to may be concluded in any form. between entrepreneurs. the lessee in a condition fit for the agreed in case of a lease of a real property for a use. the property requires repairs which than ten years. In this case the If the lessee improves the subject of lease. during the lease agreement concluded for a period longer period. The rule above is different this period the lessee may carry out the for the lease agreements concluded repairs needed at the lessor’s cost. If. Minor repairs connected with the lack of a written form. at its discretion. after this period. Paying rent is the principal obligation of the lessee. the lease agreement normal use of the property should be fixed shall be deemed to have been concluded for by the lessee. no to this agreement. the lessee may set the to have been concluded for an indefinite lessor an appropriate time for repair. provides for otherwise. however. these issues are usually covered Rent by the provisions of the lease agreements. the agreement in this condition throughout the lease shall be concluded in writing. deemed encumber the lessor. In real estate.monthly. everything that can be subject to month or if the contract is concluded for the ownership right. however. details the payment of the rent. the lease agreements regulate in apply. and if the lease is longer than one general. It should be maintained by the lessor period longer than one year. the rent should The general rule is that the lessee may be paid in advance: if the lease is not longer hand over the property or part of it to a than one month . may be also subject an indefinite period of time . If the subject of The duration of a lease agreement may lease is destroyed due to circumstances for be freely fixed by the parties.

at the latest. The real state of real estate | 113 . the guarantor undertakes to perform Poland. A money deposit cannot required. The relationship in case of non-fulfillment of the lease arising from a contract for free of charge agreement or damages caused by the use or subletting concluded by the lessee lessee. the acquirer becomes a party to the lease freedom of parties forming the content agreement as a lessor in place of the of this additional contractual claim seller. both the lessee and the third party are • Money deposit – it is a sum of money liable towards the lessor for using the submitted by the lessee in order to property in accordance with the provisions secure the lessor’s potential claims of the lease agreement. If the leased guarantee. are the subject to regulation of the Act on the protection of lessee’s rights of The leased property can be disposed of 21 June 2001 (hereinafter referred during the lease period. If. surety and bank requires the lessor’s consent. Legal and tax aspects of investing in real estate it. note. lessee. when the subject of lease Lessors often use the special clauses constitutes premises or retail areas. The new owner may terminate exceed twelve times the monthly rent the lease agreement retaining statutory for the premises and the rent should be notice periods. he may demand compensation fulfill its obligations from the promissory from the seller. which written consent of the lessor. In the case property to a third party or require the prior of lease of residential premises. unlimited discretion in determining the lease agreements forbid subletting the the content of the clause. the new owner calculated at the rate applicable at the does not have a right to terminate the lease date of the lease. The approval of the lessee is not is limited. property is handed over to a third party. agreement if it is concluded for a definite period of time. if the lease agreement does not forbid Security it. However. the lessor can make use of the return the leased property earlier than he promissory note and request the lessee would have been obliged to under the lease to redeem it. However. As far as the lease of commercial is terminated. as a result of the lease agreement In case of default in payment of rent being terminated by the acquirer of the or in case of other claims against the leased property. In practice. hand in the lease agreements to secure their over the property or part of it to a third potential claims to lessees such as money party for free of charge use or sublet it deposit. • Surety – in the contract of surety. In case the lessee does not agreement. the lessee is forced to lessee. promissory note. In this case the to as the Lessee’s Protection Act). in written form with an • Promissory note – promissory note authenticated date (data pewna) and the issued by the lessee is an effective way subject of lease has been delivered to the to protect the lessor’s potential claims. there is almost lease agreement is terminated. when the main premises is concerned. the lessor can start the court procedure against the lessee.

in the lease agreement). contrary to the terms of the agreement 114 | Poland. at the time of handing it over to the lessee. the lessor is obliged to warn the lessee in writing by giving him • if the rent is due every month – the an additional one-month period to pay contract can be terminated with a one- the overdue rent).Legal and tax aspects of investing in real estate certain obligation of the lessee towards effective at the end of the calendar the lessor if the lessee does not perform month). The liability of the than a month – the contract can be guarantor is equivalent. This applies to payment due date and after which the contracts concluded for both definite and lessor has the right to execute a bank indefinite period of time: guarantee. the subject of lease has defects Termination that make it impossible to use it in the A lease agreement concluded for an way defined in the lease agreement. • Bank guarantee – it is a unilateral obligation of the guarantor’s bank. termination (its length is in practice defined remove them in an appropriate time. guarantee . effective at the end of the calendar month (three-month notice in • if the lessee uses the subject of lease case of lease of premises or retail areas.the lessor. This means that the lessor may request a payment from both the lessee and the • if the rent is due for one day – the guarantor. mostly this refers to the payment • if the rent is due for a period shorter of due amounts. or indefinite period of time may be terminated if the defects occur later and the lessor by any party with a prior notice of does not. month notice. the Civil Code stipulates that the not fulfill its obligation. The real state of real estate . effective at the end of the lease of premises or retail areas. The lease agreement concluded for a according to which the bank will definite period of time may be terminated provide funds to the beneficiary of the only in cases specified in the contract. termination. not subsidiary. despite receiving a notice. before calendar quarter. • if. period of time is as follows: • if the lessee defaults in paying rent for • if the rent is due for a period longer longer than two full payment periods than a month – the contract can be – the lessor may terminate the lease terminated by giving a three-month agreement without notice (in case of notice. The statutory or if the defects cannot be removed period of notice of termination for the lease – the lessee may terminate the lease agreement concluded for an indefinite agreement without notice. them. if the lessee does However. terminated with a three-day notice. The parties of parties can terminate the lease agreement the lease agreement typically determine immediately if certain conditions defined a period that has to elapse from the by the above code occur. contract can be terminated one day in advance.

Tenancy agreement field of subletting a property. In practice. Also a tenancy of the property.1. the user one year should be concluded in writing.3. If the above obligation commits to hand over a subject of tenancy is violated. the lessor may terminate the to the lessee’s use and collection of profits tenancy agreement without notice. which is why the tenancy By a leasing agreement. for a non-fixed term.6. There is also subject of tenancy in the same condition. the and to hand it over to the user to use for tenancy agreement for a period longer than a defined period. Legal and tax aspects of investing in real estate or the purpose of this and. to acquire The duration of a tenancy agreement may a property from a specified transferor be definite or indefinite. agreement: Poland. the lessor should warn the lessee Residential lease agreements. does not cease to use it in this period is not specified in the contract. the financing agreement usually concerns land. commits to pay the installments agreed in otherwise it is considered to be concluded the contract.6. after this period there are two main types of the leasing passes. if the rent payment warning. The lessor retains ownership for an indefinite term. or if a lessee neglects it to such rent is payable in arrears on the date an extent that the subject of lease is customarily accepted. If lessor may terminate the lease contract the lessee defaults in payment of rent for at without notice. In exchange. due to their by giving the lessee an additional three- purpose are subject to special protection month period to pay the overdue rent.4. However. party undertakes. and in the absence at risk of being lost or damaged – the of such custom. 2. the lessor may terminate the tenancy without notice. least two full payment periods and. the lessee has a right to take over than thirty years is deemed to be concluded the ownership of the property. The real state of real estate | 115 . semiannually in arrears. the parties are able to modify increase. which arises from the provisions of the Lessee’s Protection Act. when the contract agreement executed for a longer period expires. This protection The lessee is responsible for the costs of all applies mainly to the limited possibility repairs to the extent necessary to keep the of termination of the lease. the lessor lessor’s consent. within the scope of operations of its enterprise. despite a Under the Civil Code. way. Leasing agreement The tenancy agreement gives not only the (leasing nieruchomości) right to use the property but also to collect benefits from it. the lessee commits to pay the agreed rent. There are also some differences between a lease agreement and a tenancy agreement in the 2. purposes However. The lessee (dzierżawa) cannot sublet the property without the By a tenancy agreement. a specific regulation regarding the rent However. he defaults in Lease of premises for residential payment for over three months.1. In exchange. this rule in the tenancy agreement. however. in the case of rent paid annually. for a fixed or a non-fixed term.

The agreement for property management should be concluded in • financial leasing – in this type of leasing writing.6. This operation Calculation of taxable income allows the release of funds and gives Taxable revenues minus tax deductible the opportunity to invest them in other costs constitute the tax assessment base. The agreement is signed between the same applicable tax rate is 19%. The real state of real estate . Taxable income is as a rule recognized leasing company. Management of a particular the agreement for remuneration.1. however. The essence in this case is significant adjustments relating to the tax the sale of property by the owner to a base. The duration of the financial leasing Income subject to tax contract is usually longer than the Taxable income comprises the entire operating leasing and similar to the income generated from business activities economic utility of the subject of leasing. For the exploitation of real estate.Legal and tax aspects of investing in real estate • operating leasing – in this type of leasing 2. the lessor remains the legal owner of the asset. manager. it is the lessee The property manager is required to have who makes the depreciation write. The transfer of an ownership of a damage caused in the course of activities. parties allowing the previous owner to use the property as the lessee . activities. More detailed legal and tax The costs are deductible if they were comments are presented in section 2. such as interest 116 | Poland. Taxable income There is also another form of the is calculated on the basis of financial leasing agreement which is often used statements prepared in accordance in the real estate market called sale and with Polish accounting standards after lease-back.5. otherwise null and void.8. the leasing for tax purposes on an accrual basis. a compulsory insurance of civil liability for offs.2. Property management is a professional After the end of the leasing term the activity. Tax implications that agreement. (trade or services). the most important costs. owner of the real estate and the property term basis. regulated in the Act on Property lessee may purchase the subject of Management. incurred for the purpose of revenue earning or maintaining/securing the source of revenue. An property is based on the property operating lease is commonly used to management agreement between the acquire equipment on a relatively short. Afterwards. Property management the subject of lease agreement remains agreement the asset of the lessor who makes the relevant depreciation write-offs.6. subject of a leasing agreement after its termination may be stipulated directly in 2.

10 0 0 0 0 20 depreciated at higher rates (4. 50 40 30 10 0 . – be excluded from the value of the building Effective tax and be treated as separate fixed assets . Legal and tax aspects of investing in real estate payments. a building into use.g. incurred. if they are leased) they are depreciated at a Example: rate of 1. unutilized loss: 5. Land is years following the year when the loss was not subject to tax depreciation. There is no tax loss carry back. Also business buildings. Under certain circumstances it may be Year 0 1 2 3 4 5 6 worth carrying out a cost split analysis of (Loss)/ profit (100) 60 10 10 20 5 20 investment expenditures prior to putting Loss utilised . involving the company (e. investment are generally deducted over doubtful receivables can only be deducted a period of 40 years. however. Hence.5% – 20% base per year). can be depreciated for tax purposes representation) are non– deductible. The real state of real estate | 117 . the costs of owner. A cost split analysis should be also possible Tax losses cannot be carried forward in case of the purchase of an already following certain legal transactions developed building. This could lead to significant Total loss effectively carried forward: 95. Polish tax new buildings for tax purposes is 2.g.5% per year. mergers where the losses pertain to entities which no longer exist after the merger). For example. Poland. during the period equal to the difference between 40 years and the number of years Loss carry forward rules that have passed since the building was Polish legislation provides for carrying put into use for the first time (that period forward tax losses over five consecutive tax cannot be shorter than 10 years). tax savings as the costs incurred could be deducted over a shorter period of time. This is because some machinery may – under specific regulations Carry forward . the costs of exploitation and Depreciation rate for real estate maintenance and depreciation write–offs.g.5% rules specifically exclude certain expenses per year. assets used for business purposes (e. used previously by a former entertainment expenses (e. The amount which can be utilized in any of these five years cannot exceed If residential buildings constitute fixed 50% of the total loss. The standard depreciation rate for most are considered tax deductible. the costs of real estate from tax deductible costs. 50 10 10 20 5 . Newly acquired under very strict conditions.

86. construction costs. it is then important to determine the value of the land and the Real estate tax is charged to the owner (or value of the building separately. The local authorities VAT implications of renting out set the real estate tax rates and collect the real estate taxes. then the locations and grant exemptions for certain input VAT on the rent can be deducted types of real estate. PLN 22. commission and potentially the purposes other than housing) is VAT non–recoverable input VAT related to the exempt. financial institutions and insurance the purposes of tax depreciation). Local authorities may differentiate between If the lessee performs exempt activities. in some cases the holder) of the land or buildings and infrastructure which are used for business activities. For example. If the lessee is a • for land. per m2 of the paid in the rent invoice from his output VAT usable surface of a building. regular VAT payer. interest and foreign exchange Rental of residential units for housing differences accrued during the construction (but not the rental of residential units for period. However. • for infrastructure (e.Legal and tax aspects of investing in real estate Calculation of the depreciation As of 1 January 2016 preliminary pro rata base must also be taken into account. in 2016 local authorities Rental income is subject to 23% VAT. If the lessee performs VAT exempt business 2% of the value of the infrastructure activities. the activities of regulations (initial value determined for banks. The real state of real estate . designs. building incurred before it was put into use. 118 | Poland. This are bound by the following maximum PLN VAT is added to the rent due and is payable yearly tax rates: by the lessee to the lessor. roads.g. which might result in limited recovery of input VAT The depreciation base consists of all related both to economic activity and non- costs incurred in making the investment: business activities.89 per m2 of land. proportionately on the pro rata basis computed for a given year. liability resulting from taxable activities. companies are exempt from VAT. building materials. As the value of the land is not subject Real estate tax to depreciation. he can deduct the VAT • for buildings. the input VAT on the rent is calculated according to specific irrecoverable. pipelines). tax rates for different types of activities or as well as taxable activities. PLN 0.

Exiting the investment The investor’s choice of exit strategy will be predominantly tax driven.2. The due diligence findings made during the acquisition phase are likely to bear relevance to the question of which exit strategy to choose.7. so that the investor’s position on exit will be as strong as possible. The real state of real estate | 119 . and it is important at the outset of the investment process to have a clear idea of the possible exit mechanics. and should be given proper consideration. the exit may be structured as an asset or share deal.4. Generally. The legal and tax consequences of both are presented in section 2. Poland.

etc.) as soon as possible. However.e. It is also important for both parties to agree details of the lease (duration. especially if the seller and the purchaser do not belong to the same capital group. price. i. 2.8. In the next stage the seller concludes the agreement on the lease of the real property from the purchaser. the decision on 120 | Poland. As a result of the sale. The real state of real estate . to establish the obligation of the purchaser to lease the real property back in the agreement on the sale of the real property. The first stage assumes selling the target real property by the seller to the purchaser. However.g. The main advantage of such a sale and lease back operation is the release of the seller’s capital as a consequence of the sale of the real property. From the legal perspective it is important to secure the sellers’ interest already in the first stage of the transaction. due to leasing the real property back. the real estate remains under the operational control of the original party (the seller). for investment purposes. Sale and lease back Legal aspects A sale and lease back transaction consists of two stages. the owner (or perpetual usufructuary) of the real estate changes. This capital may be thereafter used e.

such a capital gain in order to use it for including the lease costs. real estate. Therefore. Legal and tax aspects of investing in real estate choosing such a solution shall be made on it is not possible to defer the taxation of detailed calculation of all the costs related. A sale and lease-back arrangement has an Tax implications advantage for the seller / lessee that the If a sale and lease-back transaction lease payments are fully tax deductible as is structured as an operational lease. Accelerated made on the loan are tax.5%. As such.deductible. Under a lease contract. a taxable capital for the use of the land are tax-deductible gain will occur. for the benefit of the lessee. Under Polish legislation. under a sale and lease-back contract. the exploitation of the building are tax. Poland. depreciation for used buildings can The repayment of capital is not a tax- be considered in some cases. only the interest payments depreciation rate of 2. and will be able to depreciate the party to a normal direct financing value of the investment at the standard arrangement. payments than its net book value. costs incurred for the purpose of earning the buyer / lessor is in most cases the revenue. The real state of real estate | 121 . for the borrower owner. the lease the real estate asset which is the subject payments are partly a compensation for of the contract is sold at a higher price the use of the land. the debtor would be unable to depreciate the value of the If. Under a direct financing costs related to the maintenance and arrangement secured by a mortgage. reinvestment. Other triggering event. By contrast. debtor would still be the owner of the deductible for the lessor. land.

In a share deal. a due diligence should be as comprehensive as possible.1. the investor should have a fair idea of whether the real estate is worth investing time and money. may be recommended. as it needs to cover all the aspects related to the activity of the 122 | Poland. financial and tax perspective. In practice. The scope of the legal due diligence will depend on the structure of the deal. The real state of real estate . the legal due diligence review consists in gathering information and should provide the potential investor with a comprehensive view of the legal issues regarding the real property he considers acquiring.9.9. 2. conducted by technical and environmental experts. 2. Taking into account the specific status and features of a given real estate. a broader due diligence review. Legal due diligence The due diligence process is all about mitigating investment risks. In this regard. Due diligence as part of the acquisition process The main purpose of the due diligence process is to provide investors with a complex overview of the situation of the real estate being the subject of the acquisition from the legal. the scope of the due diligence will generally be wider than that required for an asset deal. By the end of the due diligence process.

for more detailed information regarding the zoning master plan. zoning master plans are the due diligence regarding the real estate local acts and define conditions for land use usually covers review of the following and destination and the scope of business matters: that can be conducted within a given area. master plan for a given area. that buildings. bases mainly on data and information provided by the seller and on enquiries Zoning Master Plan and discussions with the seller and/or the management of the target. what are the conditions of this • development and construction zoning master plan in order to confirm documentation. diligence process and which may influence the structure of the transaction. The zoning master plans are issued by the publicly available sources (such as data in local authorities (municipalities) for a given court registers) are explored.1. real interest. the issues of the conservation Review of other aspects is usually agreed and historic preservation zones and with the seller and strictly depends on the agricultural land should be verified. area. in particular. Legal and tax aspects of investing in real estate company. In case of an asset deal mostly business activity on the real estate and the legal status of the real estate should its sale. The real state of real estate | 123 . Please refer to the • utilities supply documentation. • documents related to the encumbrances it is essential to establish during the due over the seller`s real estate. the review decision on entering into the transaction. extracts on the real estate is possible provided from the land and mortgage register. Within the review of the zoning master plan. whether it will be possible to perform the • planning and zoning issues. licenses etc. In practice. type of transaction (share or asset deal). Therefore. Below we present certain issues be taken into consideration and examined that need to be analyzed during the due carefully.g.5. diligence process whether there is a local zoning master plan covering the area • lease agreements for the real estate where the targeted real estate is located concluded by the seller. Development of an investment estate acquisition agreements. Municipalities issue zoning master plans • legal documents related to the seller’s with a view to local development and public title to the real estate in use (e.). Additionally. The aim of the legal due diligence review Conservations and historic of the real estate is to identify areas of preservation zone investment risks but also other specific The zoning master plan may provide that legal aspects regarding performing of the area where the real estate subject to Poland. • environmental issues (permits. and if so. plants and other industrial extracts from the land and buildings facilities comply with the relevant zoning register. etc. planned investment. or even a Within the legal due diligence. Generally. section 2.).

but not covered by faith of the current and previous owner the master plan. in the city. it is essential 124 | Poland. Under specific conditions. Additionally. from agricultural production by obtaining Nevertheless. authority. requires a special procedure involving the former owners or their successors may modification of the zoning master plan. the outcome of such claim will classified as agricultural land in the Land primarily depend on the apparent good and Building Register. should be also excluded at the time they acquired the property. which were not resolved or were resolved Regulations in force provide for many in contravention of the law may be the base specific legal restrictions and limitations for successful claims for reestablishing and new legislation are to further restrain the rights of the previous owners or their entities other than individual farmers from successors.2). currently. apply to civil courts and initiate proceedings Such a procedure may be time-consuming aimed at the restitution of such real estate. the real estate is assigned for agricultural As a result. Currently. the City of Warsaw gained ownership annual fee has to be paid for ten years (see rights to the major part of real estate comments below).4. subject to specific conditions. the legal status of nationalized activity. However. such applications to purchase of an agricultural land. The real state of real estate . and is connected with the risk of third As the current owner benefits from the land parties challenging the proposed changes and mortgage register’s public credibility to the plan. In consequence. former owners of the real An investor considering acquisition of estate were granted the right to apply for agricultural real estate should also bear obtaining usufruct rights to real estate or in mind existing restrictions relating compensation. this issue needs to be subject an administrative decision from the relevant to analysis during the due diligence. preservation zone where some specific rules apply in order to protect the historical Restitutions claims monuments located in the zone. real estate warranty. there are no specific Agricultural land reprivatisation laws in force in Poland to The zoning master plan may provide that deal with the restitution matters and claims. Depending on the type of the real estate and its Under the nationalization laws passed in historical status there may be additional Poland after the Second World War. the development of properties is quite often subject to real estate designated for agricultural use uncertainty. many requirements and limitations established by real properties and functioning enterprises the provisions of law.Legal and tax aspects of investing in real estate the potential investor’s interest is located purchasing an agricultural real estate falls within a conservation and historic (please see comments in section 2. on the basis of the special It should be noted that after exclusion “Warsaw decree“ on land ownership of of the area from agricultural activity an 1945. However. In Warsaw. (including their real estate assets) were “nationalized” (or “communalized”). As a rule.

Entrepreneurs are often interested in • the construction of infrastructure with changing the purpose of use of the the use of public funds (placing water agricultural and forest land in order to pipes. In such cases whether any such proceedings are pending the zoning fee (“Renta Planistyczna”) with respect to the target property located may be established as a percentage (not in Warsaw. adoption of the zoning master plan may also lead to an increase in real Introduction estate market value. The zoning fee is payable by charge which may occur with regard to the the vendor in the case of a transfer of the increase of the value of the real property property within 5 years from the day when resulting from: the zoning plan came into force. determining how much the value of • quality of the land (class of soil). The real state of real estate | 125 . sewage pipes. One of the most Poland.g. Fees – holding the real estate The percentage for calculation of the Zoning fee zoning fee should be provided for in the Zoning fee (“Opłata Adiacencka”) is a master plan. higher than 30%) of the increase in value of the land calculated as at the date of the transfer of the given real estate. subject to an initial fee and subsequent The amount of the fee depends on the annual payments. business entities. property has increased by. Legal and tax aspects of investing in real estate during the due diligence to investigate its value usually increases. heating systems. Exclusion from agricultural • merging and subsequently dividing the production fee property. develop the land and realize an investment. the infrastructure with the use of public funds) obligation to pay the annual fees passes to and not higher than 30% (with respect to the purchaser. • market value of the land subject to The amount of fee shall not be higher exclusion. when a forestry Polish environmental law affects the land or an agricultural land is reclassified conduct of economic activity for most in the zoning master plan into public roads. than 50% (with respect to the division It should be noted that if the land excluded following a merger and the construction of from agricultural production is sold. • division of the property. a division) of the increase in value of the property. The value of such amount of the increase in the property’s payments depends on the: value and is usually established based on an opinion of an independent expert • area of the land subject to exclusion. electricity gas and telecommunications Exclusion from agricultural production is facilities). Environmental issues Additionally. e.

1 where the environmental decision and environmental impact assessment where described. Liability for contaminated land in some cases – especially for large Under the Polish law there are two regimes investments an environmental impact of liability for land (soil) contamination. A current holder (in particular owner or perpetual Not many investors perform due usufructuary).e. contractually exclude the above mentioned administrative liability of the purchaser for Permit requirements clean-up of contaminated land so when a Environmental permits can be basically potential investor intends to buy a property divided into two groups.9. The real state of real estate . According to the section 2. group includes permission related to the To secure purchaser’s interest. depending on the period from which the contamination originates (with the border 2. operate and use the environment) is liable Besides.2. The obligation to obtain occurred after 30 April 2007 or could be integrated permit relates to.5.e. an entity who has relevant permits to the chemical industry. inter alia. whether the seller (or the target company) Parties to the sale agreement cannot fulfills the environmental law requirements. even if such holder did usually examined during the due diligence not actually cause the contamination. It is prior to that date. revealed in the Land diligence when completing a real estate 126 | Poland. the permissible level of noise. the mineral industry and (i. obtain an integrated permit. The first one (especially one that was used for industrial includes permission obtained in the course purposes) a detailed study on pollution of of the investment process and the second the land is required.Legal and tax aspects of investing in real estate important requirements imposed by the Register. which includes The situation is different for “new” land a number of permits governing the use of contamination. An entity using the environment and steel industry. which should be evaluated assessment taking into account the provisions of the local plan. any soil damage. Financial due diligence line being 30 April 2007). contaminated land may agree to reimburse In certain circumstances Polish the purchaser with expenditures borne for environmental law imposes an obligation to the clean-up. i. which the environment. the seller of use of the property. it is important to take into account for any such damage. Permission is required only if the noise level exceeds Environmental impact the noise limits. the attributed to an activity completed after following branches of industry: metallurgy that date. assessment proceeding may be required. is liable for soil contamination environmental law is the requirement to which occurred prior to 30 April 2007 or obtain permits related to the rules of having may be attributed to activity completed an impact upon the environment.

and how does it looks • making sure constructions costs are next to the investor’s bookkeeping properly reflected in the bookkeeping procedures records. Often the investor’s own taking longer to collect rent. problems such as discrepancies between • assuring that the creation and level of the amount paid for rent as described in management information is accurate lease agreements vs. • the financial figures being viable: can Although some investors choose to forego the figures be traced back to its origin due diligence when acquiring new assets. The real state of real estate | 127 . they should understand that financial due • critical bookkeeping procedures being diligence can indicate how the acquired applied consistently and appropriately. for improvement. and any service charges not Although for transactions of a smaller scale settled for any reason this may not be a good way to evaluate a deal. internal procedures require due diligence to • charges made by the lessee being determine whether or not the transaction is enough to cover the costs of maintaining in the best interest of the investor. Legal and tax aspects of investing in real estate transaction. • lessee ever being late with the rent. or it • recognizing the net asset base for Poland. most investors understand the value Analyzing financial issues of expert outsourced financial due diligence The items listed below should be considered services. the building. • evaluating critical problems influencing • the value of the property’s NOI taking earnings position. the actual amount and adequate for the business being being paid per the accounting books. due • the influence of the bookkeeping diligence is able to discover unforeseen procedures on the financial figures. discounts on rent for any given period of time or for improvements made by • recognizing the “normal” working lessee)? capital and cash flow tides of the business and probable funding needs • bookkeeping in use being adequate down the line. reliably. for the business. A buyer usually makes use of financial • evaluating the contractual obligations due diligence to assist in identifying major the business has and their influence on issues concerning a transaction: profitability and cash flow. This rings especially true when when seeking to resolve the previously taking into account larger time-sensitive mentioned issues concerning financial due transactions (auction processes for diligence: example). considered. In addition. into account the existing lease portfolio • recognition of the need for cost • any provisions in the lease that affect recharges incurred and focus on areas the NOI adversely (for example. assets will affect metrics such as revenue and net operating income.

making not have become aware of the seller’s tax sure everything has been adequately arrears despite acting with due diligence addressed in evaluating the underlying in attempting to identify such tax arrears. the acquirer faces the concern or a viable part of that business. nature. addressing possible balance liability is excluded if the acquirer could sheet valuation discrepancies. which usually involves a pre– tax arrears of the seller. In addition. 2. indemnification from the seller. In the case of a sale of single assets (not From a tax perspective. The acquirer is then liable conducted before the transaction. This become apparent afterwards. as even if a formal decision • comparing the service charges incurred declaring that the acquirer is liable for against the bookkeeping records. focuses on acquirer (with the seller’s consent) or the assessing material tax risks pertaining seller may submit to the tax authorities a to assets or shares by reviewing the formal request for a certificate which lists tax position of the target company. if the transaction study and the preparation of transaction is reclassified into a sale of a the transaction structure in accordance going concern. only up to the value of the tax liabilities the investor may seek protection or presented in the certificate. it can also include liabilities. the claim against the acquirer may crystallize only • going over rental agreements to identify if the enforcement procedure against the balance sheet liabilities. the buyer might then be with the Polish and international tax held liable for the seller’s undisclosed tax regulations.9. rental agreements and bookkeeping This liability is in practice of a ’subordinated’ records. Performing a tax due diligence review is • comparing the rent roll against the thus a way to limit or exclude such liability. seller is ineffective (and tax claims against the seller are not satisfied). Tax due diligence According to the tax regulations the Tax due diligence. the acquirer to ensure that the appropriate tax structure should not be liable for the outstanding is used. and the seller’s tax arrears is issued. However. an assessment of the tax implications of a future exit scenario. By all the tax liabilities which are transferable identifying tax risks during due diligence to the acquirer. all the potential outstanding liabilities that are not statue In the case of an asset deal deemed to barred remain with the acquired company. earnings.Legal and tax aspects of investing in real estate acquisition. possibility of incurring an economic loss on the acquirer may be held liable for the the transaction if undisclosed tax liabilities outstanding tax liabilities of the seller. The real state of real estate . Tax due 128 | Poland.3. it is also important constituting a going concern). in general. be the acquisition of business as a going As a consequence. Acquisition of shares Acquisition of assets In the case of a share deal.

Legal and tax aspects of
investing in real estate

diligence is therefore conducted to allow tax credits and special tax privileges to
the acquirer to assess and minimize this identify related tax risks for unaudited
risk. periods and to assess whether such
tax benefits will be available post
Generally, the period of limitation for tax
transaction;
liabilities is 5 tax years following the year
in which the tax is payable. In practice this • review of withholding tax procedures
means that from the perspective of 2016 and exemptions available;
there is still a tax risk in relation specifically • review of significant historical
to a target’s corporate income tax payments reorganizations and one-off
for 2010–2016, and to other tax liabilities, transactions and their impact on the tax
in general, for 2011–2016. accounts;
• review of intercompany transactions
Tax issues analyzed and present transfer pricing policy in the
The scope of a tax due diligence review company;
depends on the structure of the planned as well as an examination of areas typical
transaction. for a real estate company, such as:
In the case of an asset deal, the scope of • the existing debt financing structure
due diligence depends on the subject of (e.g. debt push down schemes), thin
the transaction and the extent to which the capitalization and other pending
acquirer may be liable for the seller’s tax restrictions on the tax deductibility of
liabilities. interest payments on the debt;
In the case of a share deal, as the acquirer • any large differences between book
faces the full impact of any tax liabilities and tax basis of assets, analysis of the
assumed, full due diligence is usually deferred tax calculations, in particular
conducted. identification of any deferred tax
liability, e.g. from accrued foreign
The tax due diligence in case of a share deal exchange gains;
usually covers the following areas:
• rules for capital expenditure recognition
• review of tax returns for periods and the impact of foreign exchange
previously filed and review of tax differences on the initial value of fixed
calculations for periods that are not yet assets for tax depreciation purposes;
filed with the tax authorities; • policies for the tax depreciation of
• review of the results of past tax audits assets, including a review of cost
to detect tax risks for periods that segregation schemes;
are still open for tax audits by the tax • cash incentives offered to lessees such
authorities; as a rent free period or step-up rent and
• review of any obtained tax rulings; their impact on the tax accounts;
• review of any losses carried forward, • treatment of the investment costs

Poland. The real state of real estate | 129

Legal and tax aspects of
investing in real estate

incurred by lessees (leasehold model for valuation.
improvements) when the lease expires;
This can be used to get a decrease in price
• tax recognition of management charges in order to alleviate possible tax liabilities
payable by special purpose vehicles to and can be used when writing warranties
servicing companies within the group; and damages in the SPA.
• any step-up in the value of the real
The results may directly affect the
estate performed;
composition of the transaction, for
• review of input VAT refunds in the example, transforming a share deal to an
investment phase; and asset deal; they may also be used for post-
• policies for real estate tax. acquisition tax planning.
A review of the sale and purchase Along with the tax and financial due
agreement (SPA) for the acquisition of diligence results, the legal due diligence
a real estate target usually covers the review should assist the buyer in
following tax points: determining whether or not to complete the
transaction, and if so, in what form. Due
• review of the tax definitions in the SPA,
diligence investigations let the buyer’s legal
and of the tax representations and
team construct the conditions of the deal so
warranties;
that the buyer is afforded with an adequate
• review of the tax indemnity clauses in amount of comfort and protection. The
the SPA; and legal team will then be in a position to
• analysis of the SPA from the perspective address specific problems by asking for
of other protection available against tax further explanations and/or promises or
exposures. warranties from the seller. The legal team
can also evaluate whether or not such
2.9.4. The use of due diligence promises or warranties need to be covered
results when negotiating by an indemnity clause or other legal
language allowed under the Polish law.
After the whole process of due diligence,
the investor gets a general financial and tax When taken together, the financial, tax
risk overview, which makes up the origin of and legal due diligence results are a very
the information for negotiations with the strong tool which can very easily have an
seller and assists in adjusting the financial influence on the final result of negotiations,
and, in particular, how much the buyer will
ultimately pay.

130 | Poland. The real state of real estate

Poland. The real state of real estate | 131

The real state of real estate .3 132 | Poland.

investment funds and pension funds. consolidation. contingent liabilities“ Poland. insurance companies. due to the many changes in IFRS. accruals. Since that time it has issued the following National Accounting Standards (‘KSR’)to implement the Act:. In 2002 the Accounting Standards Committee was established in Poland. The Minister of Finance has also issued several regulations covering specific accounting areas such as financial instruments.Accounting aspects of investing in the Real Estate market 3. • KSR 1 “Cash flow statement” • KSR 2 “Income taxes” • KSR 3 “Construction contracts” • KSR 4 “Impairment of assets” • KSR 5 “Leasing” • KRS 6 “Provisions.1. The real state of real estate | 133 . Polish accounting regulations 3. some differences continue to exist between the Act and IFRS as noted below. However.1.1. Introduction to the accounting framework in Poland Polish accounting is regulated by the Accounting Act of 29 September 1994 with subsequent amendments (the Act). Since 2002 the Accounting Act has been undergoing significant changes to bring the Polish accounting principles closer to the International Financial Reporting Standards (IFRS). accounting for banks.

In the presentation” absence of relevant local regulations. Entities that applied for permission to list on a regulated market in Poland or other Choice Choice EEA country* 4. 3 Not permitted Required and 4).Accounting aspects of investing in the Real Estate market • KSR 7 “Changes in accounting policies. accounting for the EU as their primary basis of accounting. In any matters not the following table: Standalone Consolidated financial financial statements statements 1. Entities listed on a regulated market in Poland or other European Economic Area (EEA) Choice Required country 2. the annual periods beginning on or after The majority of the amendments became 1 January 2009. Branches of a foreign entrepreneurs that prepare financial statements in accordance Choice Not applicable with IFRS as adopted by EU 6. permit some standpoints (not a standard) on topics Polish entities to apply IFRS as adopted by related to bookkeeping. Banks (other than those included in 1. As of 18 March 2008. inventory valuation and The application criteria are summarized in green certificates. It required the following effective as of 1 January 2009 and have additional disclosures in the notes to the 134 | Poland. 3. The real state of real estate . post Ministry of Finance an entity may apply balance sheet events – accounting and the National Accounting Standards. further amendments been applicable to financial statements for to the Accounting Act were published. the • KSR 8 “Developer activity” entity may apply International Financial Reporting Standards. regulated by the Act or Decrees issued by estimates. correction of errors. Entities that are part of a group where the parent prepares consolidated financial Choice Choice statements in accordance with IFRS as adopted by EU 5. which came The Committee also issued several into force on 1 January 2005. • KSR 9 “Management report” The amendments to the Act. Other entities Not permitted Not permitted * The Companies which filed prospectus to the Financial Supervision Committee in Poland or other EEA country. emission rights.

district and provincial Principles of the budget institutions. Amendments persons. significant and companies. introduced inter alia simplified investment fund regulations. through an authorized person. except for partnerships. district and provincial budget entities. to the following entities whose • foreign legal persons.2. foreign units registered offices or place of executive without the legal personality and foreign management are located on the territory of natural persons conducting activities the Republic of Poland: in the Republic of Poland personally. • state. on the basis of the Banking Law. from 2015.000. 3. regulations. The provisions of the Act shall apply. Latest amendments to Accounting Act.1. general • recognition of changes in the fair value partnerships established by natural of investment properties and intangible persons and professional partnerships. regulations on trading in securities. provinces. assets classified as investments. of the Act. for the financial year beginning in 2009 • natural persons. insurance financial reporting for ‘small entities’. as well as other legal auditor or the audit firm. on activities of the group can be prepared • communes. except for the State Treasury to be applied in the financial statements and the National Bank of Poland. regardless financial statements or allowed that report of their level of revenue. Accounting aspects of investing in the Real Estate market financial statements: agreements not • commercial companies (partnerships recognized in the balance sheet.200. finished goods and • possibility to cease application of IFRS financial transactions for the prior as the primary basis of accounting. Accounting Act • state special purpose funds. communal. voivodships and together with the report on activities of the their associations. civil law partnerships included amongst others: established by natural persons. Application of the • communal. if their net revenue from the sales of goods for resale. • organizational units without the legal subject to the provisions of Paragraph 3 personality. the Polish zloty equivalent of EUR • changes to application of the pooling 1. The real state of real estate | 135 . financial year amounted to at least • change of the capital group definition. cooperative savings banks changed the thresholds to be applied for or regulations on the organization and the mandatory preparation of consolidated operation of pension funds. of interest method for business • organizational entities operating combinations. including those in related party transactions not on an arms’ the process of setting up) and civil length basis and remuneration of the partnerships. as well as: group’s parent entity as a single report. with the Poland.

• entities not mentioned above.200. a list of data files composing authorities or special purpose funds the books of accounts on electronic data for carrying out relevant assignments . Entities should have documentation which Investment property describes. in Polish. mutual linkages. 136 | Poland. Valuation of selected 1. for the preceding financial year are less than the Polish zloty equivalent of EUR 3. a description of the established by natural persons. if their financial statements drawn up in the Polish net revenue from the sales of goods. the tax office relevant to income sector entities tax matters. if they • a list of the books of accounts and.in respect of business principles of keeping subsidiary ledger activities conducted in the Republic of accounts and their linkages with general Poland.1. balance sheet items before the beginning of the financial applicable for real-estate year. ledger accounts. principles of events classification. proceeds from rental.000. in the case of computerized • natural persons. persons and professional partnerships • a system protecting data and its files. The real state of real estate .3. by depreciation and impairment write-offs • the manner of keeping the books of (cost model) or at its fair value (fair value accounts. profits through capital appreciation and/or • the methods of measuring assets. system and. language and expressed in the Polish and products and financial transactions currency. its adopted accounting The definition of investment property policies. budgets of local accounts. Investment property liabilities and equity. Each entity has a policy choice for chart of accounts with adopted the valuation model used. in which those subsidies or subventions • a description of the data processing were granted. may apply the accounting principles specified in the Act from the beginning Accounting records should be kept and of the subsequent financial year. and determining is valued at a purchase price decreased the financial result. such persons or partners are required to notify. with the specification of their from the beginning of the financial year structure. but which • the determination of the financial year are held for the purpose of generating and reporting periods covered by it. computer system. media. civil partnerships books of accounts. which are not used by the entity for its own purposes. in particular those related to: includes properties. receive subsidies or subventions from in the case of computerized books of the State budget. including at least a corporate model). including a list of registered partnership of natural programs. In that case.Accounting aspects of investing in the Real Estate market aid of employees . procedures or functions.

receivables for which no interest rate has been set are measured at the Cost model amount due. through to the date of the completion of the After initial recognition. using the effective interest rate method. Financial instruments are initially recognized at their acquisition cost (price). the following four categories and reported as changes in the fair value of investment follows: property are recognized in the income • held to maturity – measured at statement as other operating costs or other amortized cost. all interest-bearing construction or improvement. financial assets Any gain/loss from re-measurement to fair (including derivatives and embedded Poland. construction. are depreciated or in the revaluation reserve component on a straight-line or other systematic basis of equity until the investment is sold or over the investments’ estimated useful impaired at which time the cumulative lives. where those borrowings have funds received and including transaction been drawdown for that specific purpose costs associated with the borrowing/loan. except for hedged being the fair value of the consideration items. The real state of real estate | 137 . to the Act which came into force on 1 • loans and receivables – measured at January 2009 changes in the investment amortized cost. adaptation. are measured at amortized Financial instruments cost. Accounting aspects of investing in the Real Estate market Fair value model derivatives) are classified into one of the If the fair value model is selected. Investment recognized in the profit and loss account properties. period. except for land. Financial liabilities. The costs of the transaction are later than at the end of the reporting included in their initial value. assembly or improvement of an investment property Loans and borrowings are initially are capitalized as part of the cost of the recognized at cost. After initial recognition. cost. less accumulated depreciation and accumulated impairment write-offs. Liabilities which are held for trading are subsequently measured at fair value. investment • held for trading – measured at fair value property is recognized and subsequently with unrealized gains/losses recorded in measured at acquisition or construction the profit and loss account. other than liabilities held for trading. loans and borrowings. If the cost model is applied. short term through equity). Land • available for sale – measured at fair is valued at its acquisition cost reduced value. calculated using the property fair value were recognized effective interest rate. calculated using the operating income (before the amendments effective interest rate. are valued at amortized cost not given. being the value of the asset. with an unrealized gains/losses by impairment write-offs. gain/loss is included in the profit and loss account – the policy choice should be Borrowing costs which relate to the made by the management of the entity.

which • the performance period of the service is does not exceed the amount of the previous longer than 6 months. If a maturity date inventory is permitted if the production is known. account (when the fair value is lower than Capitalization of financial costs in the cost of the investment). based on the expected cash flows. In this case. A decrease in the fair value of a previously re-valued investment. the at amortized cost (if a maturity date is fair value is estimated based on the listed known) with gains/losses recognized in market price of a similar instrument or the profit and loss account. an increase in the at the balance sheet date in reference to fair value is recorded in the revaluation the stage of completion providing that: reserve. reduces the revaluation reserve • the substantial part of the service has if the surplus on revaluation has not been been carried out before the balance amortized by the date of the measurement. In all other cases. associates and jointly controlled Construction contracts entities and other long-term and provisions of National investments Accounting Standard 3 (‘KSR 3’) Investments in subsidiaries. as well as the in the value of an investment are 138 | Poland. sheet date. • long-term investments – at cost less impairment or at fair value with gains/ Inventories losses recognized in the revaluation reserve in equity (surplus over the cost The inventory should be stated at the lower of investment) or in the profit and loss of cost or net realizable value. affect the true and fair presentation. Investments in subsidiaries. long-term investments may be process requires a necessary long period stated at amortized cost. If of cost or market value.Accounting aspects of investing in the Real Estate market value is included in the net profit/loss for recognized as financial costs. revenues from cost. in the value of an investment. equity accounted or at fair value. is audit requirements may elect not to apply recognized as financial revenue up to the the above valuation methods if it does not amount of such expense. If construction contracts shall be determined carried at fair value. An increase the period. which is directly related to a decrease that has been The companies that do not meet statutory previously recognized as finance costs. the effects of a decrease • the stage of completion. associates or ”Construction contracts” joint ventures can be carried at historical According to the Act. of manufacturing. No specific provisions related to real estate inventory exist. revaluation. investments may be accounted for as The fair value of financial instruments follows: traded on an active market is established with respect to the prices listed on such • short-term investments – at the lower a market as at the balance sheet date. The real state of real estate . at fair value or there is no such a listed market price.

revenue. Foreign exchange differences relating to Regardless of the revenue calculation liabilities which are used to finance the method used. the expected loss shall be recognized as an expense immediately. determination carrying amounts. using the liability Standard 3 ”Construction contracts” was method. when it is probable that total assets under construction are capitalized to contract costs will exceed total contract the cost of the constructed assets. Poland rates. at the actual exchange rate applied on the The National Accounting Standard Income date of the transaction. although deductible temporary differences and certain differences between these two unused tax losses can be utilized. to the construction contracts. Deferred tax assets are disclosure of information in the financial recognized for all deductible temporary statements. For certain types of long-term investments • the measurement of work carried out. financial income or financial expense. Deferred tax In November 2006 the National Accounting Deferred tax is calculated. denominated in foreign currencies gains • another method – provided that it are recognized in the revaluation reserve. • the number of working hours Foreign exchange differences arising on attributable directly to the service revaluation are generally recorded as performance. Deferred tax assets and liabilities are measured at the tax rates that are Foreign currency transactions expected to apply (as enacted at the Transactions denominated in a foreign balance sheet date) in the period when the currency are translated into Polish currency asset is realized or the liability is settled. among other. regulations do exist. on all temporary differences at issued. the balance sheet date between the tax the following topics: determination of base of assets and liabilities and their the stage of completion. or. against which the IAS 11 Construction Contracts. The standard covers. deferred tax resulting from differences and unused tax losses. The real state of real estate | 139 . Accounting aspects of investing in the Real Estate market anticipated total cost. assets and using the method approved by the entity liabilities denominated in foreign currencies and based on: (other than shares in subsidiaries and • the share of costs incurred from the associates valued using equity method) contract commencement date in total are translated using the National Bank of estimated service performance costs. reflects the stage of completion reliably. Deferred tax liabilities of revenues and costs of uncompleted are recognized for all taxable temporary construction contract. at the rate published by the reliably. The provisions of extent that it is probable that taxable KSR 3 are in general in conformity with the profit will be available. The stage of completion shall be estimated At the balance sheet date. if the actual rate Taxes (‘KSR 2’) also requires that additional Poland. may be estimated is not known. National Bank of Poland. presentation and differences.

As required by the Act • the asset may be purchased by the the financial statements consist of: lessee at a price lower than the market value upon lease expiry. a single report. • introduction. • the lease term is longer than 75% of the • balance sheet. The pooling of is to be amortized over the useful life of the interest method may be used for business asset.Accounting aspects of investing in the Real Estate market tax credits given to companies operating Business combinations in Special Economic Zones are recognized Business combinations that are not under as government grants e. the Director’s report – • the asset is adapted to the specific detailed content requirements are needs of the lessee.1. • the legal title is transferred upon lease Financial statements must be prepared in expiry.4. insurance companies and • if cancelled. i. the lessee bears all state-owned companies are required cancellation costs. lease payments is higher than 90% of the market value of the leased asset as • statement of changes in equity. • the sum of the discounted minimum • statement of cash flows. Financial statements deferred taxes.6. below) may elect not to recognize 3. • income statement. Those companies that do not meet criteria The latest amendment allowed that for statutory audit requirements (see report on activities of the group can be section 3. in addition to the financial statements. • additional notes and explanations. specified in Article 49 of the Act. criteria for statutory audit (see section 3.1. giving rise to common control are accounted for using a deferred income. at the lease inception. All entities required to apply the provisions of the Act are obliged to prepare their Leases financial statements and consolidated A lease is classified as a finance lease if at financial statements (if applicable) for each least one of the following seven conditions financial year. The financial year need not is met: be the calendar year.e. the Polish language and expressed in the Polish currency. • the lease can be extended on more Joint-stock companies. to prepare. economic useful life of the leased asset. combinations that are under common Those companies that do not meet the control. below) may adopt simplified prepared together with the report on accounting for leases. limited liabilities favorable terms. Such a deferred income the purchase method. 140 | Poland. companies. to account for the activities of the group’s parent entity as leases in accordance with the tax treatment.1.g.6. The real state of real estate .

issuers of prepared within three months from the securities intending to file for admission balance sheet date. may be on profit distribution or loss coverage. income • stock taking (Chapter 3) statement. statement of cash flows. may be prepared in approval. Consolidated statements are subject to an audit. The annual financial to. • auditing and publishing financial statement of changes in equity and statements (Chapter 7) the contents of notes to the financial statements are determined by the • directors’ report (Article 49) Accounting Act. Prior to the Economic Area. the opinion. or issuers of securities pending statements shall be approved by the admission to trading on one of the approving body within 6 months from regulated markets of the European the balance sheet date. The entity’s management shall ensure The financial statements of issuers that the annual financial statements are of securities admitted to. is not required Poland. the annual financial accordance with IFRS. a copy of the resolution financial statements of entities being or decision of the approving body members of a capital group. Companies listed on the • protection of data (Chapter 8) Warsaw Stock Exchange when preparing • penal liability (Chapter 9) the financial statements in accordance • specific and interim provisions with the Act are guided by specific (Chapter 10) regulations for public entities. In addition. The real state of real estate | 141 . which is regulated by IFRS including: a subsidiary of another entity having • the principles of maintaining its registered office or the place of accounting books (it will not. IFRS. include the format of the European Economic Area (higher- financial statements) (Chapter 2) level parent company). they shall on a regulated market of the European be filed with a relevant court register Economic Area shall be prepared in together with a statutory auditor’s accordance with IFRS. if required. within decision in respect of the preparation of 15 days from the date of the approval of financial statements in accordance with the annual financial statements. in which concerning the approval of the annual a parent company prepares consolidated financial statements and the resolution financial statements under IFRS. shall be taken by an approving body. If the financial statements of issuers of annual financial statements of an entity securities admitted to public trading are required to be audited. The same regulations apply to the Entities which prepare their financial parent entities that prepare the annual statements in accordance with International consolidated financial statements of Financial Reporting Standards shall apply the capital group with the exception the provisions of the Act in matters not that a parent company. prepared in accordance with IFRS. Accounting aspects of investing in the Real Estate market The format of the balance sheet. The as well as with director’s report. executive management located within however.

Transparency Directive. Polish regulations preparing the consolidated financial were adjusted to the provisions of the statements. and the European Community standards. consolidated annual report of a higher. The basic principles of the Polish capital In particular. and securities company being its subsidiary and admitted by other EU regulators can all other subsidiaries of the parent under Polish provisions also be admitted company which was exempted from to trading in Poland.1. making the In such a situation the consolidated market more favourable for foreign financial statements and the investors and foreign public companies. pension funds. if: Capital Market. System of Trading as well as on Listed banks and financial markets institutions. contained in the Law on Investment Funds dated 27 May 2004. company have agreed on exemption adjusting the Polish provisions to application. • a higher-level parent company holds These provisions implement the at least 90% of its shares. 142 | Poland. Increasing attention is also applied to level parent company together with the market communication. the offering of foreign market are set out by the following investment funds in Poland is now regulations: regulated in detail. Financial reporting of as amended. shall be and insider trading.Accounting aspects of investing in the Real Estate market to prepare consolidated financial • the Act on Supervision over the statements.5. The manner in which prospectuses • a higher-level parent company will are prepared is in line with the EU be consolidating both the parent Prospectus Regulation. reflect the appropriate listed companies provisions of the EU law concerning undertakings for collective investments Regulatory environment in transferable securities. Companies. by the Financial Supervision Authority • the Act on Public Offering and on (Komisja Nadzoru Finansowego – FSA). counteracting fraud into Polish by a worn translator. • the Act on Trading in Financial The Polish capital market is supervised Instruments. 3. and all European Parliament and Council other shareholders of the parent Directives regarding the capital markets. The regulations regarding investment funds. Terms on which Financial Instruments The FSA is a single regulatory authority are Introduced to an Organized supervising insurance. protection of statutory auditor’s opinion. The real state of real estate . translated minority investors. and The FSA’s main function is is to protect the interests of investors. filed with a relevant court register within 30 days from their approval date.

The FSA may impose fines and other administrative measures upon market Financial Reporting Requirements participants who fail to comply with Polish regulations. Type of the Content includes Filling deadline *** report • Condensed Financial Statements for the quarter ended and for all quarters to date together with comparable data • No later than 45 days • There is no requirement to file the after the quarter end report for the second quarter as • For the fourth quarter no Quarterly the semiannual report is filed (does later than 60 days after not apply to funds) the fourth quarter end • There is no requirement to file the report for the fourth quarter if the annual report is filed within the quarterly report filling deadline Poland. Traded derivatives subsequent supervision of the activity include future contracts on indices and by the aforementioned entities. the WSE also supervision of brokerage houses. In addition. options on indices. Accounting aspects of investing in the Real Estate market The role of the FSA also includes market”. The real state of real estate | 143 . bonds. February 2009 on current and periodic information published by issuers of The Warsaw Stock Exchange (Giełda securities and conditions for recognition Papierów Wartościowych w Warszawie – as equivalent the information required by WSE) is the principal market in Poland laws of non-EU member states. The financial reporting requirements Securities are traded on two different for particular periodic reports (both markets within the WSE: the “main standalone and consolidated) are floor” (primary market) and the “parallel summarized in the table below. derivatives and other financial instruments are traded. the FSA is regulated by the Decree issued cooperates with local market regulators by Minister of Finance dated 19 in exercising supervision. a multilateral Poland. In 2009 the bond market include both initial control. where stocks. and public companies acting or offered in operates NewConnect. owns a stake in an OTC market called collective investment institutions and BondSpot (previously: MTS-CeTo). In case of entities Financial reporting of the entities which are also subject to supervision admitted to public trading by the FSA within other EU jurisdictions. as well selected stocks. The competences of the FSA trading system. as well as Catalyst was opened. and as over brokers and investment advisors. other instruments.

• entities which operate under regulations • the total assets as at the end of on trading in securities and regulations the financial year were at least on investment funds. • joint stock companies. • the annual average number of employees in full-time equivalents • credit unions. the Polish zloty equivalent of EUR • entities which operate on the basis of 2. 3.000. The real state of real estate . including annual financial statements of capital groups. regulations on the organization and 144 | Poland. Audit requirements operations of pension funds. as well as the annual • other entities which. met at least concern: two of the following conditions: • banks and insurers.500. in the prior financial statements of the following financial year for which the financial entities which continue as a going statements were prepared. amounted to at least 50 people.1. except for Audit shall be required in respect of companies which are in the setting-up annual consolidated financial statements process as at the balance sheet date.6. The filling dates of all periodic reports need to be in line with the dates announced in this current report.Accounting aspects of investing in the Real Estate market Type of the Content includes Filling deadline *** report • Condensed Financial Statements for the six month period • No later than 2 months Semiannual • Independent Auditor’s Review after the half-year end Report on the Condensed Financial Statements for the six months period • No later than 4 months after the year end • Annual Financial Statements • No later than 80 days Annual after the year end if the • Independent Auditor’s Opinion entity decides not to fill report for the fourth quarter *** A listed company is obliged to publish the filling dates for all periodic reports within the first month of a given year in the form of a current report.

goods for resale and finished goods and the annual financial statements of and the financial transactions for the entities which are prepared in accordance financial year. The real state of real estate | 145 . Accounting aspects of investing in the Real Estate market • the net revenue from the sales of the business combination took place.000. combined annual financial statements of investment funds. Furthermore.000. are required to be audited. required to be audited and published. are as a result of a business acquisition. the financial statements of have separate sub-funds and annual acquirers and newly-formed companies financial statements of the sub-funds. which Additionally. zloty equivalent of EUR 5. prepared for the financial year in which Poland. was at least the Polish with IFRS.

146 | Poland. Below we concentrate on the implications of the IFRS 10. 11.1. leases. which have recently brought some significant changed. 3. Some of the changes have implications that go beyond matters of accounting. 12 and 13 for the real estate and construction industries.2. Selected Aspects of Accounting for Real Estate under International Financial Reporting Standards 3. The volume of changes to IFRS is significant and is likely to continue in the foreseeable future. The nature of the changes ranges from significant amendments of fundamental principles to some minor changes included in the annual improvements process. Companies reporting under International Financial Reporting Standards (IFRS) continue to face a steady flow of new standards and interpretations. They will affect many different areas of accounting of real estate entities such as the presentation of financial statements. such as the design of joint arrangements or the structuring of transactions. as they may impact business decisions. financial instruments. a number of real estate entities apply IFRS for their accounting and reporting purposes.2. The real state of real estate . The challenge for preparers will be to gain an understanding of what lies ahead. Introduction Nowadays.

for using the equity method (no other These standards are effective for annual method possible). structure of the joint arrangement is The changes introduced by IFRS 10 not the only factor considered. 3. (with some modifications)..1 Introduction • IFRS 11 deals with jointly controlled entities (JCEs) and addresses only two In May 2011. Whereas require management to exercise previous regulations of IAS 31 focused more judgement to determine which exclusively on the legal form of the entities are controlled. IFRS 11 and IFRS 12 of control and adding requirements to consider when making control decisions.e. consolidation procedures (i.2. so that the model that applies to all entities. IFRS 11 is intended follows: to broaden the focus for classifying • IFRS 10 establishes a single control a joint arrangement. In Poland and in For joint operations (including former the whole European Union standards came jointly controlled operations. consolidation. compared with entity. in IAS 27. which generally requires 2013. potentially. One of the most Poland. Rather. One of standards that amended consolidation rules the primary reasons for the issuance of of entities: IFRS 11 was to increase comparability within IFRS by removing the choice • IFRS 10 Consolidated Financial available for JCEs to use proportionate Statements. including a number IFRS 10 changes whether an entity is of new disclosures.2. Interaction between IFRS consolidated.2. IFRS 11 focuses more broadly on the previous requirements that were the rights and obligations arising from in IAS 27. the International Accounting forms of such joint arrangements (joint Standards Board (IASB) issued three new operations and joint ventures). liabilities. jointly with an effective date of 1 January 2014. associates and simply been moved to IFRS 10. JCEs that meet • IFRS 11 Joint Arrangements and the definition of a joint venture (as • IFRS 12 Disclosure of Interests in Other newly defined) must be accounted Entities.2. IFRS 10 does not change the arrangement. Accounting aspects of investing in the Real Estate market 3. structured entities. Instead. an entity recognises the first year new rules were applied. revenues and expenses. and/or its relative share of The major changes introduced are as those items. and must be applied retrospectively the equity method for joint ventures. The real state of real estate | 147 . Those requirements have joint arrangements. controlled assets and. by revising the definition 10. if any. some so for the majority of companies 2014 was former JCEs). how • IFRS 12 summarizes all the to consolidate an entity) from the disclosure requirements related to requirements that previously existed an entity’s interests in subsidiaries. This also converges periods beginning on or after 1 January with US GAAP. its assets.

revenue interest under Financial instruments Other IFRS and expenses the equity method Disclosures in Disclosures in Disclosures in accordancewith accordance with accordance with IFRS 12 and other IFRS 12 and other IFRS 12 relevant IFRS relevant IFRS 148 | Poland. IFRS 11. the information be consolidated – by providing used to make that judgement will more information about certain be transparent to users of financial unconsolidated entities. The real state of real estate .Accounting aspects of investing in the Real Estate market significant changes introduced by statements. Even group in case reaching a different if management concludes that it does conclusion regarding entities to not control an entity. Account for liabilities.Interaction between IFRS 10. The new disclosures will IFRS 12 is that an entity is required to also assist users of financial statements disclose judgements that were made in to make their own assessment of the determining whether it controls or has impact on the financial results of the joint control over another entity. Diagram 1 . IFRS 12 and IAS 28 Does the investor control an entity by itself? YES NO Consolidation Does the investor in accordance have joint control with IFRS 10 over an agreement? Disclosures in YES NO accordance with IFRS 12 Joint Classify joint Joint Does the investor operation arrangement in venture YES have significant NO accordance with influence over IFRS 11 an entity? Account for assets.

. entity (the investee). an investor controls an investee its subsidiaries. it may not be so clear. the investee. Poland. (a) power over the investee. in which the investee. IFRS 10 applies to following: all types of entities. and entities that the parent controls). However. in other cases (such any. Diagram below as when there are potential voting rights.2. controls an investee. illustrates this assessment. A group returns from its involvement with consists of a parent and its subsidiaries (i. When an entity is a parent it needs to assess (c) the ability to use its power over the whether it (the investor) controls the other investee to affect the amount of the investor’s returns. or has rights. the assets. or rights.Consolidated Excerpts from IFRS 10: Financial Statements Consistent with previous requirements 6 An investor controls an investee when IFRS 10 requires that a parent (unless it is exposed. based on the facts and circumstances it is clear that whichever investor holds (considering the Application Guidance in a majority of those voting rights controls IFRS 10). liabilities. and other types of entities.2. including corporations. (b) exposure. when decision-making is the voting rights). or an investor holds less than a majority of In many cases. to variable exempt) present consolidated financial returns from its involvement with the investee and has the ability to affect statements.e.2. Accounting aspects of investing in the Real Estate market 3. That is. are presented as those of if and only if the investor has all the a single economic entity. expenses and cash flows of the parent and 7 Thus. if the investee. partnerships. income. to variable trusts. The real state of real estate | 149 . IFRS 10 provides a new definition of a control together with a changed guidance on assessing whether the entity has control of an investee. limited liability corporations. to determine which investor. equity. further analysis is needed the holder exposure to variable returns. In controlled by voting rights that also give those instances. IFRS 10 requires those returns through its power over financial statements of the group. IFRS 10 .

activities include: Thus. determine whether • Voting rights Examples of returns include: the investor is a principal or an agent. that is. • Dividents options or convertible • Scope of its authority • Remuneration instruments) • Rights held by other parties • Economies of scale. Relevant activities are the activities of the investee that significantly affect the In many cases.g. negative or both. there are two critical terminating the employment of an concepts: investee’s service providers or key management personnel • Relevant activities • Establishing operating and capital • Existing rights decisions of the investee. An investor has power when it products or processes has existing rights that give it the current • Making capital or funding decisions ability to direct the relevant activities. acquiring or disposing of assets 150 | Poland. remunerating or investor has power. Joint control is life discussed in more details later. include the items below) defined as the contractually agreed sharing • Selling and purchasing goods and of control of an arrangement. Therefore. which the investee. scarce products. if any. Examples of relevant significantly affect an investee’s returns. it is important to identify • Determining and changing operating the activities that most significantly affect and financial policies (which might returns.Definition of control Power Returns Linkage Determine which party. • Selecting. which exists services only when decisions about the relevant activities require the unanimous consent of • Managing financial assets during their the parties sharing control. the current ability to exposed. Understand purpose and design of investee The first criterion to have control relates • Researching and developing new to power. The real state of real estate . if any. • Exposure to variability from a management contract synergies or other returns that other interests • Removal or „kick-out” rights are not available to other interest holders However. when assessing whether an • Appointing. or has rights to variable the ability to use its power to direct the relevant activities. cost • Rights to appoint key personnel savings. Returns can be its involvement with the investee. power does not arise from protective rights. considering: • Potential voting rights (e. • Remuneration • Decision making rights within proprietary knowledge. This differs from joint control. in order to decide which party. including budgets. returns from its involvement with affect the investor’s returns from Power arises from the rights. Evaluate linkage Assess returns Identify power may include: positive. has Assess whether the investor is Evaluate whether the investor has power. If applicable. has power.Accounting aspects of investing in the Real Estate market Diagram 2 . more than one activity will investee’s returns.

on a loan. If that investor does veto the that are designed to protect the interest budget. and detriment of the investor is not a protective right. Examples of exposures to variable of the investee if an investee defaults returns include: Poland. defined as: rights budget. this compensation reflect fair value? might be the case if the operating budget is • Did other investors also receive this detailed and management has little latitude right? If not. has the if the investee defaults on a loan. investor holding that right would need to which gives him the power over investee. a right might be deemed investee. Examples of In this fact pattern. re-assess whether that right has become a substantive right (rather than a protective In order to give the power the rights right). or has rights. such as the ability to sell assets or both. based on the change in facts and needs to be substantive. Returns can be positive. For example. the following should be considered when evaluating whether an investor’s rights are substantive: Example — Veto right over annual budget — protective or not? • Why were the rights granted? An investor determined that approving the • What compensation was given (or annual operating budget of an investee received) for the right? Does that is the relevant activity. if any. an exceptional circumstance. i. arise from protective rights.e. However. An investor In addition IFRS 10 introduces a new term has the right to veto this annual operating of protective rights. Control does not the veto right. carries existing rights. then a veto right over the annual change the credit risk of the investee to operating budget would be substantive. The real state of real estate | 151 . Evaluating whether approving an annual operating budget is the • Approve an investee’s capital most relevant activity will depend on facts expenditures (greater than the amount and circumstances. and giving that party power over the entity to re-submit the budget to the investor holding which those rights relate. the current ability to direct those activities. management of the investee must of the party holding those rights without re-draft and re-propose the budget. spent in the ordinary course of business) The second criterion for assessing whether • Approve an investee’s issuance of equity an investor has control of an investee is or debt instruments determining whether the investor has • Veto transactions between the investee an exposure. For example. because approving the protective rights include the right to: annual operating budget is the activity that • Restrict an investee from undertaking most significantly affects the investee’s activities that could significantly returns. circumstances. negative protective. Accounting aspects of investing in the Real Estate market Once the relevant activities are identified. to variable and a related party returns from its involvement with the In some cases. why? to deviate from the budget. and requires judgement. when default is considered the next step is to determine which investor.

it is necessary to assess whether other investors the decision-maker is a principal or an Simply having an exposure to variable agent to determine whether it has control. it does not consolidate the investee. the focus is on the existence such as to: 152 | Poland. proprietary knowledge. does not control that investee.2. this criteria. fees and involvement with the investee is essential exposure to loss from providing credit for having control. or over the investee. To control the investee.Accounting aspects of investing in the Real Estate market • Dividends. but has from its involvement with the cannot use its power to directs the activities investee to most significantly affects the investee’s • Economies of scale. not the securities that expose the investor to amount of the exposure to variable returns. residual interests power over the investee but cannot benefit in the investee’s assets and liabilities on from that power. For example. and the ability to use merely power for the benefit of others. the has control. cost savings. or other exposures to delegated or are being held for the benefit variable returns that are not available to of others. It There are many reasons why one might use should be emphasised that with respect to a joint arrangement to conduct business. does not control that liquidation of that investee. it is common for a lender A principal may have control over the to have an exposure to variable returns investee. payments that it receives from the borrower. products.3 IFRS 11 . The real state of real estate . the credit risk of the issuer. an investee The link between power over an investee • Remuneration for servicing an and exposure to variable returns from investee’s assets or liabilities. the lender would not 3. variable The third criterion for having control is interest on debt securities.2. However. tax benefits investee. An investor that has an exposure and access to liquidity that an investor to a variable return from an investee. would consolidate the from a borrower through variable interest investee. returns from its involvement with an This is because if the decision-maker has investee does not mean that the investor been delegated rights that give it power. the decision-maker must assess whether those investor would also need to have power rights give power for its own benefit. When decision-making rights have been synergies. and if so. An investor that has or liquidity support. fixed interests on debt of an exposure to variable returns. the amount of the investor’s returns.Joint control the borrower if it does not have the ability to affect those variable interest Arrangements payments (which is frequently the case). other that the investor must have the ability to distributions of economic benefits and use its power over the investee to affect changes in the value of an investment in the amount of the investor’s returns. scarce returns. As its power over the investee to affect an agent cannot control over the investee.

some agreements a greater financial interest to one of the that are referred to as ‘joint arrangements’ two parties. In practice. management will need to carefully control. Other arrangements may not use the and the relevant facts and circumstances. defined by IFRS 11. or its arrangements whereby only one party has purpose. The real state of real estate | 153 . which exists only when decisions about the relevant activities • Facilitate distribution of product require the unanimous consent of the • Take the first step in acquiring parties sharing control. No matter what terminology or ‘joint ventures’ actually include is used to describe the arrangement. a business As discussed in more detail below. • Expand geographically 5 A joint arrangement has the following characteristics: • Protect supply chain and production capacity (a) The parties are bound by a contractual arrangement. Accounting aspects of investing in the Real Estate market • Accelerate the development of new technologies Excerpts from IFRS 11: • Turn existing technologies into 4 A joint arrangement is an arrangement marketable products of which two or more parties have joint • Enter new markets or industries control. IFRS 11 split ownership equally (50/50) between covers all arrangements in which there is two parties — while others may give joint control. • Bring in additional expertise 7 Joint control is the contractually • Comply with the requirement of agreed sharing of control of an a government stakeholder arrangement. • Leverage intellectual property held by others (including competitors) (b) The contractual arrangement gives two or more of those parties joint • Distribute risk control of the arrangement. • Act as an alternative to raising bank or 6 A joint arrangement is either a joint equity financing operation or a joint venture. or no parties have joint control. term ‘joint arrangement’ or ‘joint control’. as arrangement. Some arrangements Poland. evaluate the terms of the arrangement. to determine if it qualifies as a joint but could still be joint arrangements.

consent is not new. or may require a minimum proportion of the a group of the parties.Accounting aspects of investing in the Real Estate market Diagram 3 . The requirement agree unanimously to decisions about the to have unanimous consent ensures that relevant activities of the arrangement. When that control the arrangement. To have unanimous consent. IFRS 11 clarifies when 154 | Poland. that collectively voting rights to make decisions. only unless it specifies which parties (or those parties that collectively control the combination of parties) are required to arrangement must agree. scenarios presented below in Diagram 4 While the requirement for unanimous clarify on this. minimum can be achieved by more than it is not necessary for every party to the one combination of the parties agreeing. Two no single party controls the arrangement. For example. a contractual arrangement unanimous consent of all the parties. arrangement to agree to have unanimous the arrangement is not a joint arrangement consent.is it a joint arrangement? Does the contractual arrangement give all of the parties NO (or a group of the parties) control of the arrangement collectively? Outside the scope of IFRS 11 YES (not a joint arrangement) Do the decisions about the relevant activities require the unanimous consent of all of the parties that collectively NO control the arrangement? YES Joint arrangement IFRS 11 states that decisions about unanimous consent exists. the relevant activities require the in some cases. Accordingly. The real state of real estate .

e. IFRS 11 states that there are two types of joint arrangements: either a joint operation or a joint venture. arrangement. Diagram 5 . specify which parties must agree.Joint control? Scenario 1 Scenario 2 75% vote to direct relevant 75% vote to direct relevant Requirement activities activities Party A 50% 50% Party B 30% 25% Party C 20% 25% Joint control — A and B No joint control — multiple collectively control the combinations of parties arrangement (since their votes could collectively control the and only their votes. A and B or A meet the requirement). there is no unanimous consent. The real state of real estate | 155 . together arrangement (i. Since there are parties that collectively control multiple combinations.Joint operation vs Joint venture Type of Joint operation Joint venture Arrangement The parties with joint control The parties with joint control have rights to the assets and Definition have rights to the net assets obligations for the liabilities of the of the arrangement. Parties with joint Joint operator — a party with joint Joint venturer — a party with control control in a joint operation joint control in a joint venture Poland. Because and C could vote together to meet Conclusion they are the only combination of the requirement). Accounting aspects of investing in the Real Estate market Diagram 4 . it is clear that A contractual agreement does not and B must unanimously agree. and the the arrangement..

sale of the output by the joint operation • Its expenses. liabilities. its share of liabilities. different terms Jointly controlled operations Jointly controlled assets Jointly controlled entities Joint ventures Accounting: recognise its assets. revenues and expenses incurred jointly 156 | Poland.Accounting aspects of investing in the Real Estate market Type of Joint operation Joint venture Arrangement A joint operator accounts for the following in accordance with the applicable IFRS: • Its assets. its expenses and its share of expenses Joint operations Joint ventures Joint arrangements The parties that have joint control have rights The parties that have joint to the assets and obligations for the liabilities control have rights to the net IFRS 11 relating to the arrangement. a joint venture is only one type of regulations of IAS 31. proportionate consolidation shares of income its income. including its share of any assets held jointly • Its liabilities. joint ventures joint arrangement. including its share A joint venturer accounts for of any liabilities incurred jointly its investment in the joint Accounting • Its revenue from the sale of venture using the equity overview its share of the output arising method — proportionate from the joint operation consolidation is not a choice • Its share of revenue from the anymore. Accounting: recognise its share IAS 31 Accounting: equity method or liabilities. and/or its shares of assets. jointly controlled assets and used in practice. assets of the arrangement. Diagram 6 — Similar concepts. liabilities. this term is narrowly jointly controlled operations. whereas under defined in IFRS 11. including its share of any expenses incurred jointly Although the term ‘joint venture’ is broadly included JCEs. Under previous IFRS 11. expenses and its of assets. revenue Accounting: equity method and expenses. Accounting: recognise its assets. The real state of real estate .

.e. the following factors need to be either a joint operation or a joint venture. the joint arrangement is automatically a joint • Contractual terms and conditions operation. The real state of real estate | 157 . It is the joint arrangement. considered: the first step is to assess whether there • Legal form of the separate vehicle is a separate vehicle. However. If not. Accounting aspects of investing in the Real Estate market When classifying a joint arrangement as vehicle. then that indicates critical to understand whether the joint that it is a joint operation. In some cases. basis for settling its liabilities it is critical to understand the purpose If both of the above are characteristics of and design of the joint arrangement. the parties have rights to substantially all of the economic benefits of the assets) Poland. with an output (i. arrangement: significant judgement will be involved to • Primarily aims to provide the parties decide. if there is a separate • Other facts and circumstances Diagram 7 — Classifying a joint arrangement Is the joint arrangement structured through NO a separate vehicle? YES Does the legal form of the separate vehicle give the parties rights to the assets and obligations for the liabilities relating YES to the arrangement? NO Joint operation Do the terms of the contractual arrangement give the parties rights to the assets and obligations for the liabilities relating YES to the arrangement? NO Do other facts and circumstances give the parties rights to the assets and obligations for the liabilities relating YES to the arrangement? NO Joint venture When classifying a joint arrangement as • Depends on the parties on a continuous either a joint operation or a joint venture.

Accordingly. there is arrangement give the parties rights to nothing in the facts and circumstances the assets or obligations for the liabilities that suggests the parties have rights of the arrangement. Determining whether the series (in this priority): of cash calls implies that the parties are • Repayment of external debt substantially the only source of cash • Remaining profit distributed to flows contributing to the arrangement. this would be is to construct a residential complex a joint venture. that the parties will construction have to contribute cash to the joint arrangement through a series of cash • Sales proceeds will be used as follows calls. Neither the legal form does not mean that the joint arrangement nor the contractual terms of the joint is a joint operation. whether the parties have an obligation for the liabilities Analysis — Since there is a separate of the arrangement. debt finance from third parties to fund or requirement. the preliminary analysis indicates that this is a joint 158 | Poland. If the joint joint arrangement give the parties rights arrangement gives the parties rights to to the assets or obligations for the the net assets. liabilities of the vehicle. or obligations for the circumstances are as follows: liabilities. Therefore.Accounting aspects of investing in the Real Estate market Example — Construction and real estate sales Fact pattern — A separate vehicle is venture.e. (i.. There is an expectation. it would be a joint venture. Other facts and to the assets. for selling residential units to the public Variation — The contributed equity is not • Contributed equity by the parties is sufficient to purchase the land and raise sufficient to purchase land and raise debt financing. The real state of real estate . since they only expect to receive any net profits after the external • The purpose of the joint arrangement debt is repaid. The fact that the parties are the established. parties and therefore. over which two parties have only source of cash flows at inception joint control. and because neither the legal the arrangement is a joint operation) form nor the contractual terms of the is a matter of judgement. whether vehicle.

This classified as joint ventures under IFRS 11. Accounting aspects of investing in the Real Estate market To sum up it seems that the main impact the parent owned less than a majority of IFRS 11 will be felt where proportionate of voting rights. and financial statements of the joint venturer.g. relation to subsidiaries that are not wholly 4 An entity shall consider the level owned. consequently. For example. in subsidiaries.2. and such entities are more than a majority of voting rights. The requirement in so that useful information is not IFRS 12 is more expansive than the obscured by either the inclusion of a requirement in IAS 27. do not meet the objective comprehensive disclosure standard. in paragraph 1. Joint ventures must be accounted for using an entity is required to disclose how it only the equity method under IFRS 11. and the investor owned JCEs under IAS 31. together with disclosures required by associates and structured entities into one other IFRSs. will result in recognising only a single line item investment in a joint venture in the Excerpts from IFRS 12: statement of financial position. an entity shall disclose In comparison to previous regulations the whatever additional information is additional disclosures appears mostly in necessary to meet that objective.4.. joint arrangements. with. The real state of real estate | 159 . and risks associated financial statements of affected entities.Disclosure of (b) the effects of those interests on Interests in Other Entities its financial position.2. and 3. its interests in other entities. It shall determining whether or not it has control aggregate or disaggregate disclosures over an investee. change in the disclosure reflects the degree This is because the transition to IFRS 11 of judgement that is required to determine will result in substantial changes to the whether an entity is controlled. Poland. This that enables users of its financial could potentially be a significant change statements to evaluate: in the presentation of these areas of the (a) the nature of. financial IFRS 12 combines the disclosure performance and cash flows. consolidated. This evaluated potential voting rights (e. requirements for an entity’s interests 3 If the disclosures required by this IFRS. which only required large amount of insignificant detail entities to disclose circumstances when: or the aggregation of items that have (1) a subsidiary was consolidated and different characteristics. IFRS 12 . and (2) an investee was consolidation was used to account for not consolidated. and a single line item for the proportionate share of 1 The objective of this IFRS is to require net income and changes in equity in the an entity to disclose information statement of comprehensive income. One of the new requirements of of detail necessary to satisfy the IFRS 12 is that an entity discloses the disclosure objective and how much significant judgements and assumptions emphasis to place on each of the it has made (and changes thereto) in requirements in this IFRS.

In income approach. but provides a framework for situations where another standard requires Similarly additional disclosure requirements or permits fair value measurements. legal form under IFRS 11 (as it was under IAS 31) IFRS 13 does not prescribe which valuation technique must be used in a particular 3. the Accounting standards Board in May 2011 income approach and the cost approach. The cost 160 | Poland. since its not available. maximizing the use of observable market inputs. The valuation technique measurements – used to measure fair value should be appropriate for the circumstances. which customary in such a market transaction.e. other valuation techniques classification is not merely based on should be applied. an exit price) regardless of examples of significant judgements for whether that price is directly observable which disclosure may be required: or estimated using another valuation technique. The requirements in transfer a liability in an orderly transaction IFRS 12 reflects the degree of judgement between market participants at the that is required to determine whether an measurement date under current market entity has joint control. and started to be effective for annual The market approach uses prices and periods beginning on or after 1 January other relevant information generated by 2013. permitted by IFRS. and implications for the real one for which sufficient data is available. IFRS 13 Fair value circumstance. If the observable market inputs are operation or a joint venture. • Whether a right is merely a protective right (which does not give joint control) The fair value measurement assumes or a substantive right that gives an that market participants have sufficient entity joint control knowledge and awareness of the asset • Whether a manager of an arrangement or a liability that would be usual and is acting as principal or as agent. IFRS 13 describes how to measure market transactions involving identical or fair value under IFRS when it is required or comparable assets.3. such as quoted • Whether a joint arrangement is a joint prices. The standard does not the valuation is based on estimated future income and profit or cash flows. estate sector Valuation techniques that are typically IFRS 13 was issued by the International used include the market approach.2. The following are conditions (i. arises in relation to significant judgements and assumptions made when determining IFRS 13 defines fair value as the price that whether or not the joint control over an would be received to sell an asset or paid to arrangement exists. The real state of real estate . fair value. would likely affect the conclusion The definition emphasizes that the whether the manager has control or fair value should be based on market joint control measurements.Accounting aspects of investing in the Real Estate market options) and whether it is a principal or an change when an entity is required to use agent.

active markets for identical assets or liabilities. adjustments to judgement. liability. IFRS 13 the use of relevant observable inputs and disclosures may be required for individual minimize the use of unobservable inputs. Poland. IFRS 13 requires these classes of impairment assets (and liabilities) be determined based • Determining the fair value of identifiable on: assets and liabilities as part of the (a) the nature. the segment comprises residential assumptions are reasonable and consistent properties in countries with property with the requirements of IFRS 13. The real state of real estate | 161 .g. This performed externally or internally. characteristics and risks of purchase price allocation applied in the asset or liability. properties or small groups of properties IFRS 13 also includes a fair value hierarchy if the individual properties or groups of based on the inputs used to determine fair properties have different risk profiles (e.. if methodologies and assumptions used in the properties have the same risk profile the valuations and determine whether the (e. unobservable inputs and qualitative and the properties in an operating segment (as quantitative sensitivity analysis. • Compiling and disclosing information on the fair values of property The determination of the appropriate interests. may be the case even if there is a large management must understand the number of properties in the segment. At IFRS 13 requires an entity to maximize the other end of the spectrum.. including but not limited to class of assets will require significant significant assumptions. and a business combination • Measuring an interest in a real estate (b) the level of the fair value hierarchy joint venture or associate at fair value within which the fair value measurement is categorised. value as follows: a real estate entity with two properties – an office building in a developed country and • Level 1 – quoted prices (unadjusted) in a shopping centre in a developing country). • Measuring property interests at fair Many of the IFRS 13 disclosures are value required for each class of assets (and • Testing property interests for liabilities). Accounting aspects of investing in the Real Estate market approach reflects the amount that currently • Level 2 – inputs other than quoted would be required to replace the service market prices included within Level 1 capacity of an asset (often referred to as that are observable for the asset or current replacement cost). defined by IFRS 8 Operating Segments) may be a class of assets for the purpose of Regardless of whether valuations are the disclosures required by IFRS 13. At one end of the spectrum.g. either directly or indirectly. Real estate entities may be affected by IFRS • Level 3 – unobservable inputs (valuation 13 in various aspects of their business when: techniques that do not make use of observable inputs). markets of similar characteristics).

The new disclosures will not require comparative data. purchases. Not Required Not required Not required the reasons and related accounting policies required For Level 3 measurements. and a description of where such amounts are recognised For Level 3 measurements. sales. and changes in the Required Not required Required Not required valuation technique. Investment property Investment property at at cost fair value (measured at fair (for which fair value is value on the recurring basis) Disclosures disclosed) IFRS 13 IAS 40 IFRS 13 IAS 40 New Old New Old requirements requirements requirements requirements Fair value at the end of the reporting period Required Required Required Required Level of the fair value hierarchy within which the fair Required Not required Required Not required value measurement in its entirety is categorised For Level 2 and Level 3 measurements. in its first set of financial under IAS 40 will remain effective. a description of the Not Required Not required Not required valuation processes used by the entity required 162 | Poland. The new statements following the adoption of disclosures are to be applied prospectively IFRS 13 is presented below. quantitative Not information regarding the significant unobservable Required Not required Not required required inputs Amount of transfers between Level 1 and Level 2. valuation technique and the inputs used. and the reasons for those changes For Level 3 measurements.Accounting aspects of investing in the Real Estate market The previous requirements in IAS 40 for Illustrative set of disclosures for a real how fair value is determined have been estate entity that has investment properties replaced by the requirements in IFRS 13. Not Required Required Not required issues. settlements. The real state of real estate . certain disclosure requirements financial position. transfers in and out of Level 3 required and reasons and policies for transfer and where all such amounts are recognised) For Level 3 measurements. reconciliation from the opening balances to the closing balances (including gains and losses. measured at fair value on its statement of However. the totalgains or losses included in profit or loss that are attributable to the change in unrealised gains or losses relating Not Required Required Not required to those assets and liabilities held at the reporting required date. if applicable. for annual periods commencing on 1 January 2013.

a description Required Not required Not required required of interrelationships between those inputs and other unobservable inputs and of how they might magnify or mitigate the effect of changes in the unobservable inputs If the highest and best use of a non-financial asset differs from its current use. a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly Not different amount and. if applicable. Accounting aspects of investing in the Real Estate market Investment property Investment property at at cost fair value (measured at fair (for which fair value is value on the recurring basis) Disclosures disclosed) IFRS 13 IAS 40 IFRS 13 IAS 40 New Old New Old requirements requirements requirements requirements For Level 3 measurements. The real state of real estate | 163 . disclose that fact and Required Not required Required Not required the reason for it Poland.

Bank covenants With significant number of real estate loans maturing in Europe in the next years. Company A disclosed a table with a breakdown of all loans. however the companies should consider any other information that may be valuable for the readers and are perceived on the market as a good practice. Selected IFRS issues and their implications for real estate entities 3.3. including all applicable covenants 164 | Poland. 3.1. be one of the key attention items in financial reporting. the financing and refinancing of property activities is still one of the key challenges for the real estate sector and should. inevitably. The real state of real estate . the appropriate covenants disclosures in the financial statements are key to provide to the recipients of the financials significant information about liquidity of the company. Below we present some of the leading practices in disclosing the financial debt covenants in the financial statements.3. Taking the above into consideration. International Financial Reporting Standards describe which disclosures are required.

of 31.IGD (50% current 16.438 10 281. there were breaches of loan agreement terms other than those described in paragraph 18.570 19-Dec-15 Bullet LTV ‹= 80% loan Fund Portfolio Mortgage RGD . sinking fund.826 13 126.12.4 million annual repayment Mortgage of € 2.469 24-Apr-13 Bullet loan Pubblici portfolio LTV ‹= 65% ICR ›= 1.3 million Mortgage Comit Pension 162. interest.2012 used as date covenants used as (€/000) security security [€] annual repayment Montenero Mortgage of € 1. Accounting aspects of investing in the Real Estate market IFRS 7: “18 For loans payable recognized at the end of the reporting period.176 1 9. an entity shall disclose: (a) details of any defaults during the period of principal.910 02-Apr-13 N/A loan final balloon of € Bisaccia 17. and (c) whether the default was remedied. 19 If. during the period.12.875 30-Nov-12 Bullet Debt/Equity ‹= 5 BS). before the financial statements were authorized for issue. 17.2012 amount properties Final due Financial Loan type Transaction of properties Reimbursement 31. or redemption terms of those loans payable.4 million with LTV ‹= 70% FIAT portfolio 45. on or before the end of the reporting period). The real state of real estate | 165 .4 million with shopping mall. or the terms of the loan were renegotiated.630 21-Dec-15 Bullet N/A Beinasco account LTV ‹= 70% Mortgage Fondo Immobili Consolidated 88.529 1 18.090 30-Jun-15 loan final balloon of € DSA ›= 10% 40.Darsena account Mortgage Property in current 6.604 3 121.352 1 31.770 21-Dec-15 Bullet N/A Beinasco account Mortgage Property in current 21. or the terms of the loans payable were renegotiated. an entity shall disclose the same information as required by paragraph 18 if those breaches permitted the lender to demand accelerated repayment (unless the breaches were remedied.714 1 37. (b) the carrying amount of the loans payable in default at the end of the reporting period.1 Poland.” Market value Carrying No.

630 29-Dec-15 Bullet Y3 -65% Y4.800 31-Dec-16 Bullet N/A loan Volta. 4-6 – 61.547 177 1. of 31.553 1 84.5 million Office) Property in via Mortgage LTV ‹= 65% Messina.300 Cities (Project 62.796. € 0.20 from 30/06/13 ICR BS ›=1.634 1 34.LTV ‹= (70%Y1- Mortgage -Milanofiori and 56. repayment plan as propertiesof ICR ›=159% (**) Bonds 521.758 2 88.59 (**) Various annual repayment properties in Mortgage of € 2.540 24-Feb-15 N/A loan 2013 and final 10 Turin balloon of € 13.594 1 22. 14.12.103 20-Sep-21 described below the Imser 60 LTV‹= 80% (***) securitisation (*) ICR ›= 1.2012 used as date covenants used as (€/000) security security [€] annual repayment LTV ‹= 60% Property in Corso Mortgage of € 2.897 5 126.7 38 – Milan annual repayment Mortgage Property in of € 1. 4 – Milan to ›=1.75 Property in Mortgage million from March Corso Marconi. Milan Consolidated ICR ›= 140% 2012 Annual financial report of Beni Stabili S.2 million Mortgage Property in via 12.30 Properties ICR ›= 170% in Rozzano .360 27-Jul-16 Bullet loan ICR ›= 110% Freud.130 1 252.450 28-Jul-14 loan final balloon of € ICR › 1.5 million with LTV ‹= 60% major Italian 65.700 19-Nov-14 Bullet loan ICR ›= 1. 5 – Varese LTV ‹= 65% Consolidated Property in Mortgage LTV ‹= 60% Piazza Sigmund 141.0 million then 150% Telecom LTV ‹= 80%.456 1 20.Accounting aspects of investing in the Real Estate market Market value Carrying No.342 1 107.60 loan via Pergolesi – Y5)-Consolidated Milan LTV ‹= 65% annual repayment of € 0.A.2012 amount properties Final due Financial Loan type Transaction of properties Reimbursement 31.920 31-Dec-16 N/A loan Nerviano final balloon of € 21 million Property LTV ‹= 65% LTV BS ‹=75% Property in Mortgage ICR IMMOBILE Galleria del 44. The real state of real estate .330 2-Aug-15 loan final balloon of € 2/08/13 ›=120% Milan 58.0 million with ICR Until Matteotti. SIIQ 166 | Poland.230 4-Aug-15 Bullet loan from › =1.12.9 million with 27.15 Corso.946 1 55.p.3 million. 14.

If breaches in meeting the financial value of properties) on the financial covenants permit the bank to immediately covenants as well as a terminal values of call loans and borrowings.g. It is recommended to include required to disclose additional information information about impact of a rational as described in point 18 (b) and 19 of change in the operating ratios (e. Accounting aspects of investing in the Real Estate market Company B disclosed a table showing the loan covenants and the level of compliance as at 31 December 2012: Financing Ratios/covenants Limit(1) 12/31/2012 12/31/2011 Net debt/Value of holdings (Loan- ≤ 60% 43.8% to-Value) Syndicated EBIT DA/Net interest expenses ≥ 2. The that give the information about headroom current or non-current classification of between the entity’s operating ratios and its loans may directly impact the perceived minimum financial covenants: and real liquidity of the entity.1 Bn €13. that would lead to breach of is obliged to present that part of a loan covenants. as a current liability in its statement of Below we present the sample disclosure financial position as at year end.5% bilateral loans Value of holdings.9% total gross financial debt Bond issues Secured debt/Revalued Net Asset ≤ 50% 9. considered to be good practice is sensitivity In case of breaching one or more covenants analysis with respect to the applicable the entity’s management would be covenants. especially where loan covenants are breached. That „The Group tested its compliance with its is why the management should determine financial covenants regularly and operated that appropriate waivers are obtained comfortably within these limits throughout prior to year-end to support any current 201X. the company these rations. The real state of real estate | 167 .5 loans and Secured debt/Value of holdings ≤ 20% 15. Property values could decline by Poland.2% Klepierre SA Value (excluding Steen & Strom)(2) (1) Most constraining contract limit. (2) NAV including transfer duties after deferred tax.0 2.6 2. group share ≥ €6 Bn €13.7% 14.0% 9.2 Bn Klepierre SA Ratio of financings of subsidiaries (excluding Steen & Strom) over ≤ 30% 3.6% 7. Kleppiere 2012 Annual Report Additional disclosure that is not required 50% at the balance sheet date before there by IFRS 7 (as presened above) but is would be a breach of financial covenants.6% 45. fair IFRS 7.

exercise requires agreement by more • ability to use its power over the investee than one party. direct the relevant activities. or to the decisions accounting for their funds. it is clear when all three the impact of waivers obtained prior to criteria have been met.2) may lead to consolidation of that involvement may indicate that the entities that were not previously included asset manager has the opportunity in the group.2. However. potentially resulting in and incentive to obtain the ability to more assets and liabilities on the books. if their from its involvement with the investee. when they have: a single investor can decide to kick out the asset manager). must also be given to the level of The new definition of control included involvement the asset manager has in in IFRS 10 (further discussed in Chapter determining the scope of its authority: 3. to variable returns considered an agent.2 IFRS 10 Consolidated interest and its management fee). This would generally indicate been an issue.3. Determining that it is permitted to make without the whether or not a fund managers have to prior approval of the other investors in consolidate their managed funds has long the fund. which As a result asset or fund managers may could indicate that the asset manager is be obliged in certain circumstances to a principal. may need to consolidate the fund) or as an agent (in which case. and that right is • power over the investee. consideration manage for consolidation. IFRS 10 has changed how that it is an agent acting in a fiduciary fund managers shall assess the funds they capacity. The more investors that would have to agree to 168 | Poland. but – implications for fund are not limited to: managers • Scope of the asset manager’s decision IFRS 10 Consolidated Financial making authority (An asset manager Statements has a significant impact on the does not usually have discretion to make consolidation process of the real estate changes either to the activities that it is investment funds and fund managers permitted to direct. However.2. and whether they effectively consideration will be required to assess provide a period of grace ending at least 12 whether an asset manager acts as months after the reporting period. careful the year-end. substantive. then the asset manager is • exposure. therefore. However. then it is not conclusive to affect the amount of the returns to as to whether the asset manager is the asset manager.” a principal (and. Financial Statements The factors to be considered include. The real state of real estate . a principal or an agent.Accounting aspects of investing in the Real Estate market classification of the liability as well as assess In most cases.) consolidate the asset or funds into their • Rights held by others (If one party own financial statements in a situation (investor) holds a removal right (that is. it recognizes only its direct 3. or rights.

the greater the fee. which examples provide guidance on assessing is not uncommon in the real estate a principal/agent relationship. the more likely it is that the demonstrate that the more easily the fund asset manager is a principal. third party rights and variability of total However. or asset manager (if the fee received holds a large direct interest. in particular. rather. they are not industry. the less interests.) is commensurate with the services IFRS 10 includes the following examples provided. The real state of real estate | 169 . relative to the in the assessment of a principal/agent expected returns from the investee relationship. In general. interests. this may be the • Exposure to variability in returns case when an asset manager provides through the remuneration of the credit enhancement to the fund. an agent. of exposure to variability of returns will be • Variable returns held through other required before the entity would conclude interests (when an asset manager holds it is acting as a principal. this may indicate that it is not intended to create ‘bright lines’ but. Accounting aspects of investing in the Real Estate market remove the asset manager. the examples (the fund). Example Scope of 3rd party rights Other Principal/ (IFRS 10 decision to remove fund Remuneration interests Agent reference) making rights manager Narrowly 1% of net asset 10% direct 13 None Agent defined remit value interest 1% of net asset Wide ranging Removal for value and 20% 2% direct 14A Agent discretion cause of profits after interest a hurdle is reached 1% of net asset Wide ranging Removal for value and 20% 20% direct 14B Principal* discretion cause of profits after interest a hurdle is reached Poland. For instance. Although these other interests in an investee. but. decisions made by the asset important that removal right is. they illustrate how is likely to be considered an agent. By virtue of holding other are for illustrative purposes only. the higher a level consolidate the underlying investments). and returns should be qualitatively considered exposure to variability. and would manager can be removed. when manager may differ from those it would determining if the asset manager is have made if it did not hold those other a principal). and the arrangement includes that highlight all four factors discussed ‘market’ terms. the asset manager above.

Common property under construction is not reliably methods found include: (i) the hypothetical determinable but expects the fair value of developer’s method otherwise known as the property to be reliably determinable the “residual method” valuation. The real state of real estate . and (ii) the when construction is complete. IAS 40 paragraph 53 states (IVS).” 3.Accounting aspects of investing in the Real Estate market Example Scope of 3rd party rights Other Principal/ (IFRS 10 decision to remove fund Remuneration interests Agent reference) making rights manager Removal 1% of net asset without Wide ranging value and 20% 20% direct 14C cause by Agent discretion of profits after interest independent a hurdle is reached board Removal 1% of net asset without cause Wide ranging value and 10% 35% direct 15 by widely Principal discretion of profits after interest dispersed a hurdle is reached investors *Example 14B of IFRS 10 states “having considered its remuneration and the other factors. it shall discounted cash flow (DCF) method. companies that measure under construction usually requires the their investment properties at fair value use of estimation models.3 Accounting for construction is completed (whichever is investment property earlier). As a result of this transaction prices of similar properties amendment. therefore there is a need that the fair value of an investment for more detailed guidance.3. the fund manager might consider a 20% investment to be sufficient to conclude that it controls the fund. A lack of under construction.” under construction Under the revised IAS 40 a question may arise regarding the main valuation 2009 was the first year that companies principles to be applied in relation to the had to apply the amendment to IAS 40 investment property under construction that includes investment properties under fair value model. The valuation of IPUC is complex and the following: “If an entity determines judgmental area. finance and 170 | Poland. measure that investment property under construction at cost until either its fair The hypothetical developer’s method value becomes reliably determinable or deducts costs of construction. IAS 40 does not also need to measure their investment contain any specific guidance as to the properties under construction at fair valuation of IPUC and reference is often value unless the fair value is not reliably made to International Valuation Standards determinable.

Even if principle.e. IAS 36 requires a recoverable amount to The answer to this question is not straight be determined as the higher of: (i) value in forward as it involves judgment and. EPRA advises caution against recognizing which is a discounted future cash flow a development gain until a substantial part analysis. As mentioned above in-use calculation must be performed. EPRA does not provide guidelines specific assumptions into market specific as to which criteria should be applied. value of the completed project. or (ii) fair value less cost to sell. The real state of real estate | 171 . arise when the fair value for investment any investment property under construction property under construction can be reliably carried at cost is still subject to impairment determined. the gross development have been obtained. This may be released more detailed guidance to assist the case when a substantial proportion (and improve consistency amongst) of the rentable area has been leased to preparers of financial statements. If such a discounted future cash of the project risks has been reduced or flow must be prepared for IAS 36 purposes. assumptions. the are substantially eliminated. Accounting aspects of investing in the Real Estate market anticipated profit (a percentage cost) from • All required building and letting permits an exit value. i. Indicators that may be used assess whether the substantial risks are eliminated may include: Poland. This may be the case when discount factors. that all project risks have been identified. The DCF • Development costs can be reliably approach uses (project) risk adjusted estimated. In any event. Based on these specifically caution against the recognition identified risks and the assessment of of a development gain until the project risks sufficient comparable market data. it may not be that difficult to change entity However. valuers. it is important are substantially consistent with EPRA. with the exception that IVSB does not evaluated and quantified. advisers and investors. and Association (EPRA) and the International • The value of the completed property Valuation Standards Board (IVSB) have can be reliably estimated. in use. eliminated. a fixed price construction contract with Both the European Public Real Estate the main contractor is agreed. a value- assess the reliability. it is management that needs to fair value is considered unreliable. The IVSB principles According to the IVSB. valuer normally determines the adjustment As a result of the above a question may needed to reflect project risks. tenants. provisions of IAS 36 Impairment of Assets.

The real state of real estate .4 172 | Poland.

Strategic Advisory and Real Estate M&A.com +48 22 557 75 43 Anna Andrzejewska is a Senior Manager in the Real Estate Advisory Group. transaction support.ey. especially in the preparation and implementation of the strategy of corporate portfolio development and management as well as in investment process management. Anna Andrzejewska Anna.Kicinska@pl.Contact REAL ESTATE GROUP Anna Kicińska Anna. market analysis. Poland.ey. and corporate real estate management. She specializes in strategic advisory consultancy in the real estate sector. She is a certified property manager.com +48 22 557 75 42 Anna Kicińska is a Partner and Leader for CSE Region of the EY Real Estate Advisory Group responsible for real estate Transaction Support. She completed a post-graduate School of Real Estate Valuation at Warsaw School of Technology. She has over nineteen years of real estate experience in valuation. She graduated from the University of Łódź with Master’s degree in Finance and Banking and specialization in Investments and Real Estate.Andrzejewska@pl. She is a certified Polish appraiser and a member of The Royal Institution of Chartered Surveyors (MRICS) and Certified Commercial Investment Member (CCIM). The real state of real estate | 173 .

Anna is a member of the Royal Institution of Chartered Sureyors (MRICS).com +48 22 557 67 06 Katarzyna Lubaś is a Marketing and Business Development Coordinator in the Real Estate Advisory Group. embracing both single asset as well as portfolio of office.ey. Paweł gained market experience working for several global real estate companies and strategic consultancy firm. The real state of real estate . Anna graduated from Faculty of Economics at Warsaw University of Life Sciences with specialization in economics and organization of enterprises. retail warehouse and hotel properties. He has conducted numerous valuations for internal.Borkowska@pl. 174 | Poland.A. Paweł obtained a Master degree in economics (specialization: enterprise management and Real Estate). He is certified Polish appraiser and a member of The Royal Institution of Chartered Surveyors (MRICS). She is responsible for PR and new business development activities. Graduate of the Warsaw School of Economics. market research and investor relations.com +48 22 557 64 86 Anna Borkowska is a Manager in the Real Estate Advisory Group. She has broad experience in conducting valuations for accounting. Paweł Nowakowski Pawel.Nowakowski@pl.com +48 22 557 66 16 Paweł Nowakowski is a Manager in the Real Estate Advisory Group.ey.Contact Anna Borkowska Anna. investment and loan security purposes. She completed a post-graduate School of Real Estate Valuation at Warsaw School of Technology. investment and loan security purposes as well as providing both developers and investors with market and feasibility studies for commercial properties. Katarzyna Lubaś Katarzyna.Lubas@ey.

He has a broad experience in the cooperation with largest Polish and foreign clients.Master in Management Degree (CEMS MIM International Programme. Poland.ey. Member of EY Real Estate Group.Flis@pl.ey. Member of EY Real Estate Group. including Warsaw Stock Exchange registrants. She Graduated from Warsaw University of Technology. He has wide experience in working for biggest multinational and Polish companies. NHH Bergen.com +48 22 557 84 21 Mateusz is a Manager in Assurance. Łukasz Jarzynka Lukasz. EY Leader in Assurance Services for Real Estate for Central and South Eastern Europe Certified Coach and CEO of Business Women Leaders Foundation (Fundacja Liderek Biznesu). Katarzyna is experienced in working with multinational and biggest Polish companies. including companies listed on the Warsaw Stock Exchange. EY Warsaw. He is Polish Chartered Auditor. She is Polish Chartered Auditor.Jarzynka@pl. Łukasz graduated from Finance and Banking Faculty of Warsaw School of Economics (Szkoła Główna Handlowa w Warszawie) with a Masters’ Degree. Member of the Real Estate Group. Norway). Mateusz Flis Mateusz.com +48 22 557 85 05 Katarzyna is an Executive Director in Assurance.Twarowska@pl. He graduated from Warsaw School of Economics.He is a Polish Chartered Auditor and a member of National Chamber of Chartered Auditors in Poland. as well as Community of European Management Schools . Contact ASSURANCE SERVICES Katarzyna Twarowska Katarzyna. The real state of real estate | 175 .ey. EY Warsaw. Mateusz has over 7 years of comprehensive audit experience of separate and consolidated financial statements prepared in accordance with IFRS. including number of listed companies. US GAAP and Polish Accounting Act. EY Warsaw.com +48 22 557 84 29 Łukasz is a Senior Manager in Assurance.

disposals of assets. International Financial Reporting Standards and Polish Accounting Standards. Poland. including in particular transaction services and tax optimizations. complex projects. including publicly listed companies.ey. Tomasz is a certified tax advisor and has almost two decades of experience in managing large. He has a Master Degree in Finance and Banking Warsaw School of Economics. tax structuring projects and post-closing reorganisations and optimisations (mergers. etc. He was involved in the biggest transactional projects on the Polish market for corporate clients and investment funds. He is a graduate of the Faculty of Law and Administration of the University of Adam Mickiewicz in Poznań and an Executive Programme in Real Estate at the Solvay Brussels School of Economics & Management at Université Libre de Bruxelles. Hubert gained experience durign audits and reviews of capital groups reporting under US GAAP.). He is a chartered tax advisor and has 14 years of experience in tax advisory. Sebastian Ickiewicz Sebastian. TAX SERVICES Tomasz Ożdziński Tomasz.Ozdzinski@pl.Contact Hubert Rogoziński Hubert. especially in the real estate and telecommunications sector.Ickiewicz@pl.ey.com +48 22 557 69 22 Tomasz Ożdziński is the head of the Tax Real Estate Group of EY in Poland and a member of EY’s Transaction Tax (M&A) Team. de-mergers.com +48 22 577 84 71 Hubert is a Manager within EY Assurance and Advisory Business Services practice.ey. 176 | Poland.Rogozinski@pl. Sebastian’s managed and supervised numerous tax buy-side or vendor due diligence projects. undertaken both locally and internationally. Member of Association of Chartered Certified Accountants. The real state of real estate . In the final stage of qualifications for Polish Certified Auditor. Member of EY Poland Real Estate Group.com +48 22 557 75 24 Sebastian is an Executive Director in International Taxation Group and Tax Real Estate Group at EY’s Wrocław office.

Poland. Michał Sawicki Michal. providing tax advisory services on domestic tax law.com +48 22 557 78 18 Daniel is a Transaction Tax Manager and member of Tax Real Estate Group at EY’s Warsaw office. divestments and multinational tax structuring projects.Sawicki@pl. international tax planning. He advised during leveraged real estate acquisitions.com +48 22 557 79 04 Anna Pleskowicz is a Senior Manager in International Tax Services Group and Tax Real Estate Group at EY’s Warsaw office. an author of various press articles relating to tax issues.ey. She has been with EY since 2004. She is a certified tax advisor. Michal is an author of various articles relating to tax aspects of investing on the real estate market and co-author of the book “Taxation of the Real Estate Market”.). Daniel Banach Daniel. Daniel is an author and co-author of numerous publications in press. financing etc.Banach@pl. including international tax structuring. He is a certified tax advisor. He is a chartered tax advisor with over 7-year experience in tax advisory and finalizes his ACCA qualifications. His professional experience includes both buy-side and sell-side advisory for corporates and private equity. He has also considerable experience in refinancing and debt restructuring projects conducted in an international environment. international tax structuring and planning (corporate issues. Anna is a co-author of the book “Taxation of the Real Estate Market” and co-author of the book „International tax planning”. tax assistance in establishing tax effective exit scenarios.ey.Pleskowicz@pl. His skills include advising on global restructurings. He was involved in projects concerning tax issues in relation to the process of setting up.com +48 22 557 70 26 Michal Sawicki is a Senior Manager in Tax Real Estate Group at EY’s Warsaw office. operating and restructuring of companies.ey. In 2008 Anna worked as Polish Tax Desk in New York. Contact Anna Pleskowicz Anna. Daniel also advised on tax efficient exit strategies for real estate companies as well as debt-push down and step-up structures. advise on tax effective planning methods. tax accounting. He has been with EY since 2007. The real state of real estate | 177 . Her skills include advising on global restructurings.

Bokowy@ey. From 2013 to 2015 he held a position at Ernst & Young LLP’s International Tax Services group based in New York where he led the Polish tax desk. He was involved in projects concerning tax aspects of setting up. spin-offs. assistance in re-financing schemes. day-to-day tax advisory. The real state of real estate . 178 | Poland. providing tax advisory services on domestic tax law. operating and restructuring of companies. global restructurings. etc. tax assistance in establishing tax effective exit scenarios. Michał is a co-author of the book “Taxation of the Real Estate Market” and author of various articles relating to tax issues.com +48 22 557 70 24 Michał Koper is a Senior Manager within International Tax Services Division and Real Estate Group of EY in Warsaw. He assisted in many investment / dis-investment projects for real estate clients and investment funds. tax effective ownership structures and financing schemes. Mikołaj Bokowy Mikolaj.Koper@ey. He has been with EY since 2006. His professional skills include advising on tax planning for international investments in Poland.com +48 22 557 74 39 Mikolaj is a Transaction Tax Manager and member of Tax Real Estate Group at EY’s Warsaw office. implementation of the step-up structures and restructurings of businesses (such as mergers. His professional experience includes: numerous structuring and tax due diligence projects. He is a chartered tax advisor and a legal counsel with over 7-year experience in tax advisory.Contact Michał Koper Michal. He is a certified Polish tax advisor.).

The range of her expertise covers conducting legal due diligence and providing legal advice in connection with M&A transactions and restructuring projects.com +48 22 557 75 92 Barbara Chochołowska is a legal counsel with eleven years of experience in working for domestic and international entities from different sectors. The real state of real estate | 179 . both the asset and the share deal transactions). Contact LEGAL SERVICES Zuzanna Zakrzewska Zuzanna.ey.ey. She has strong experience in providing legal support related to the real estate matters including the real estate due diligence and the transactions of the real estate acquisitions (i. She has extensive experience in providing legal support and day to day legal advises to companies particularly from the real estate. Zuzanna specializes in providing legal assistance related to the corporate law including restructuring processes and M&A transactions.e. During years of practice Barbara has worked on a variety of complex corporate and real estate .related deals involving multi-jurisdictional and international matters. financial services and energy sector.com +48 22 557 78 16 Zuzanna is an advocate with fifteen years of experience in legal advisory for domestic and international entities from different sectors. She has advised in a numerous transactions involving the acquisition of companies and assets related to real estate both on the buyers and sellers side.Chocholowska@pl. Poland. She also supports clients in drafting and negotiating the lease agreements and the management contracts of commercial and industrial spaces. Zuzanna also advised clients during processes of examination of legal status of the real estate as well as during negotiating of the lease agreements.Zakrzewska@pl. Barbara Chochołowska Barbara.

Contact Katarzyna Kłaczyńska Katarzyna. Magdalena Kasiarz-Lewandowska Magdalena.M.Klaczynska@pl. She has advised on a number of high-profile regulatory projects. She also specializes in providing the ongoing legal assistance in the scope of civil law and company law. including acting as a leading counsel for power sector companies and the Polish government regarding climate change regulations and developing advocacy strategy concerning revision of the current Environmental Impact Assessment model on behalf of the Business Association of Polish Power Plants. LL. Katarzyna is a member of the New York Bar.ey.com +48 22 557 62 07 Magdalena Kasiarz-Lewandowska is an advocate and a Senior Associate in EY Law with ten years of experience in advising on the sale.ey. including mergers. advising on the restructuring of capital groups.. is an attorney specializing in energy and environmental matters. and Harvard Law School. as well as cross-border mergers.Lewandowska@pl. including preparation and negotiation of lease and service agreements. The real state of real estate . 180 | Poland. where she was granted Gammon Fellowship for Academic Excellence. She advised in numerous transactions on shares and assets related to real estate both on the buyers and sellers side. She has worked on a number of environmental and regulatory due diligence projects for the variety of sectors. divisions and transformations of companies. She is also experienced in environmental aspects of shale gas investments. reorganization and liquidation of companies with international capital (conducting M&A transactions and legal audits).com +48 22 557 79 61 Katarzyna Kłaczyńska. She graduated from Jagiellonian University in Poland.Kasiarz.

lease agreements) as well as advising on investment financing. Before joining EY Piotr was working in real estate departments in two high quality law firms in Warsaw. He has strong experience in providing legal support related to commercialization of shopping centers and office space lease. Piotr specializes in real estate trading law.com +48 12 424 32 64 Joanna Toruniewska is a legal counsel with more than five years of experience in advising for domestic and international entities from different sectors.e. A graduate of the Faculty of Law at the University of Wrocław.Wozniak@pl. The real state of real estate | 181 .e.com +48 71 375 10 22 Piotr Woźniak is a legal counsel with six years of experience in real estate and property development legal aspects. The range of her expertise covers conducting legal due diligence and providing legal advice in connection with M&A transactions and restructuring projects. location of developments and contracting with architects and construction companies. including due diligence before the real estate acquisitions.ey. Piotr also completed postgraduate studies on commercial companies legal regulations at University of Wrocław and postgraduate studies on legal aspects of construction process at the Warsaw School of Economics. preparing and negotiating different types of real estate agreements (i. She also represented the clients before the courts during the cases regarding the real estate issues. sale and purchase agreements. Piotr advises clients on matter relating to property purchase.Toruniewska@pl. He is responsible for comprehensive advice on preparation stage of development projects and day to day problems connected with development process. Poland. wind farms. Piotr has also advised in infrastructure projects i. Contact Joanna Toruniewska Joanna. Piotr Woźniak Piotr. shell gas platforms and gas transmission networks. She assisted the entrepreneurs in the real estate transactions.ey. spatial planning and land development law and construction law.

The real state of real estate .182 | Poland.

The real state of real estate | 183 . Poland.Appendix Withholding tax rates under Poland’s double tax treaties (payments from Poland)1 Dividends (%) Interest (%) Royalties (%) Albania 5/10 (d) 10 5 Algeria (gg) 5/15 (d) 0/10 (k) 10 Armenia 10 5 10 Australia 15 10 10 Austria 5/15 (a) 0/5 (k) 5 Azerbaijan 10 10 10 Bangladesh 10/15 (a) 0/10 (k) 10 Belarus 10/15 (e) 10 0 Belgium 5/15 (cc) 0/5 (k) 5 Bulgaria 10 0/10 (k) 5 Canada 5/15 (a) 0/10 (pp) 5/10 (qq) Chile 5/15 (c) 15 (dd) 5/15 (h)(ee) China 10 0/10 (k) 7/10 (h) Croatia 5/15 (d) 0/10 (k) 10 Cyprus 0/5 (oo) 0/50 (k) 5 Czech Republic 5 0/5 (k) 10 Denmark 0/5/15 (s) 0/5 (k) 5 Egypt 12 0/12 (k) 12 Estonia 5/15 (d) 0/10 (k) 10 Finland 5/15 (y) 0/5 (k) 5 France 5/15 (a) 0 0/10 (p) Georgia 10 0/8 (k) 8 Germany 5/15 (jj) 0/5 (k) 5 1 Generally effective 1 January 2016.

Dividends (%) Interest (%) Royalties (%) Greece 19 10 10 Hungary 10 0/10 (k) 10 Iceland 5/15 (y) 0/10 (k) 10 India 15 0/15 (k) 20 (bb) Indonesia 10/15 (c) 0/10 (k) 15 Iran 7 0/10 (k) 10 Ireland 0/15 (kk) 0/10 (k) 0/10 (v) Israel 5/10 (b) 5 5/10 (h) Italy 10 0/10 (k) 10 Japan 10 0/10 (k) 0/10 (i) Jordan 10 0/10 (k) 10 Kazakhstan 10/15 (c) 0/10 (k) 10 Korea (South) 5/10 (a) 0/10 (k) 10 Kuwait 0/5 (z) 0/5 (k) 15 Kyrgyzstan 10 0/10 (k) 10 Latvia 5/15 (d) 0/10 (k) 10 Lebanon 5 0/5(k) 10 Lithuania 5/15 (d) 0/10 (k) 10 Luxembourg (ii) 0/15 (oo) 0/5 (k) 5 Macedonia 5/15 (d) 0/10 (k) 10 Malaysia 0 15 15 Malta 0/10 (hh) 0/5 (k) 5 Mexico 5/15 (d) 0/10/15 (k)(aa) 10 Moldova 5/15 (d) 0/10 (k) 10 Mongolia 10 0/10 (k) 5 Morocco 7/15 (d) 10 10 Netherlands 5/15 (a) 0/5 (k) 5 New Zealand 15 10 10 Nigeria (gg) 10 0/10 (k) 10 Norway 0/15 (hh) 0/5 (k) 5 Pakistan 15 (j) 0/20 (k) 15/20 (n) Philippines 10/15 (d) 0/10 (k) 15 Portugal 10/15 (o) 0/10 (k) 10 Qatar 5 0/5 (k) 5 184 | Poland. The real state of real estate .

(d) The lower rate applies if the recipient of the dividends is a company that owns at least 25% of the payer. The real state of real estate | 185 . Dividends (%) Interest (%) Royalties (%) Romania 5/15 (d) 0/10 (k) 10 Russian Federation 10 0/10 (k) 10 (w) Saudi Arabia 5 0/5 (k) 10 Singapore 0/10 (r) 0/10 (k) 10 Slovak Republic 5/10 (c) 0/10 (k) 5 Slovenia 5/15 (d) 0/10 (k) 10 South Africa 5/15 (d) 0/10 (k) 10 Spain 5/15 (d) 0 0/10 (f) Sri Lanka 15 0/10 (k) 0/10 (l) Sweden 5/15 (d) 0 5 Switzerland 0/15 (ll) 0/5/10 (mm) 0/5/10 (nn) Syria 10 0/10 (k) 18 Tajikistan 5/15 (d) 10 10 Thailand 19 (t) 0/10/20 (k)(m) 5/15 (f) Tunisia 5/10 (d) 12 12 Turkey 10/15 (d) 0/10 (k) 10 Ukraine 5/15 (d) 0/10 (k) 10 United Arab Emirates 0/5 (z) 0/5 (k) 5 United Kingdom 0/10 (ff) 0/5 (k) 5 United States 5/15 (g) 0 10 Uruguay (gg) 15 0/15 (k) 15 Uzbekistan 5/15 (c) 0/10 (k) 10 Vietnam 10/15 (d) 10 10/15 (q) Yugoslavia (u) 5/15 (y) 10 10 Zambia (gg) 10/15 (d) 10 10 Zimbabwe 10/15 (d) 10 10 Nontreaty countries 19 20 20 (x) (a) The lower rate applies if the recipient of the dividends is a company that owns at least 10% of the payer. Poland. (c) The lower rate applies if the recipient of the dividends is a company that owns at least 20% of the payer. (b) The lower rate applies if the recipient of the dividends is a company that owns at least 15% of the payer.

(f) The lower rate applies to royalties paid for copyrights. The 5% rate applies to dividends paid to pension funds or other similar institutions operating in the field of pension systems. management and control. The treaty should be checked in all cases. The relevant treaty should be consulted in all cases. In the case of certain countries. (l) The 0% rate applies to royalties paid for. interest paid to government units. (o) The 10% rate applies if. the rate also applies to banks (the list of exempt or preferred recipients varies by country). among other items. (v) The lower rate applies to fees for technical services. on the date of the payment of dividends. advertising. patents and trademarks. (n) The lower rate applies to know-how. industrial. 186 | Poland. legal assistance. (s) The 0% rate applies if the beneficial owner of the dividends is a company that holds directly at least 25% of the capital of the payer of the dividends for at least one year and if the dividends are declared within such holding period. guarantees and pledges and similar services). (q) The lower rate applies to know-how. supervisory or management services. local authorities and central banks. commercial or scientific equipment or information. trademarks and for industrial. The real state of real estate . (p) The lower rate applies to royalties paid for the copyright. commercial and scientific equipment. (m) The 20% rate applies if the recipient of the interest is not a financial or insurance institution or government unit. The 10% rate applies to royalties paid for patents. commercial or scientific equipment or information. among other items. the treaty rate of 20% does not apply. (h) The lower rate applies to royalties paid for the use of. or the right to use. (w) The 10% rate also applies to fees for technical services. The 15% rate applies to other dividends. (i) The lower rate applies to cultural royalties. (k) The 0% rate applies to among other items. the higher rate applies to royalties for patents. (r) The lower rate applies to certain dividends paid to government units or companies. data processing. search and selection services. The 15% rate applies to other dividends. (u) The treaty with the former Federal Republic of Yugoslavia that applied to the Union of Serbia and Montenegro should apply to the Republics of Montenegro and Serbia. accounting. the recipient of the dividends has owned at least 25% of the share capital of the payer for an uninterrupted period of at least two years. the higher rate applies to copyrights. market research. the use of or the right to use industrial. (j) This rate applies if the recipient of the dividends is a company that owns at least one-third of the payer. patents and trademarks. services comprising scientific or technical studies. (t) Because the rate under the domestic law of Poland is 19%. commercial or scientific equipment. (y) The lower rate applies if the beneficial owner is a company (other than a partnership) that controls directly at least 25% of the capital of the company paying the dividends. copyrights.(e) The lower rate applies if the recipient of the dividends is a company that owns more than 30% of the payer. (x) The 20% rate also applies to certain services (for example advisory. research and advisory. (g) The lower rate applies if the recipient of the dividends is a company that owns at least 10% of the voting shares of the payer. trademarks and industrial.

For interest paid on or after 1 July 2013. (ee) The general treaty rate for royalties is 15%. (ll) The 0% rate applies to dividends paid to a company (other than a partnership) that holds directly at least 10% of the capital of the company paying the dividends on the date the dividends are paid and has done so or will have done so for an uninterrupted 24-months. a 5% rate applies to certain types of interest payments. if Ireland levies tax at source on dividends. the 15% rate is replaced by any more beneficial rate agreed to by Chile in a treaty entered into with another jurisdiction. However. • the payer of the interest holds directly at least 25% of the share capital of the beneficial owner of the interest. The real state of real estate | 187 . (bb) Because the rate under the domestic law in Poland is 20%. The 0% rate may also apply to dividends paid to certain pensions funds. (ff) The 0% rate applies if the beneficial owner of the dividends is a company that holds at least 10% of the share capital of the payer of the dividends for an uninterrupted period of at least two years. For example. (kk) The lower rate applies if the beneficial owner of the dividends is a company that holds directly at least 25% of the voting power of the payer. Poland. (hh) The 0% rate applies if the beneficial owner of the dividends is a company that holds directly at least 10% of the capital of the company paying the dividends on the date on which the dividends are paid and has held the capital or will hold the capital for an uninterrupted 24-month period that includes the date of payment of the dividends. (gg) The treaty has not yet entered into force. Under the Ireland treaty. the general withholding tax rate for royalties is 10%. under Chile’s tax treaty with Spain. The 0% rate applies to such interest if any of the following conditions is satisfied: • the beneficial owner of the interest is a company (other than a partnership) that holds directly at least 25% share capital of the payer of the interest. (ii) The withholding tax rates listed in the table are effective from 1 September 2013. the 0% rate is replaced by a rate of 5%. under Chile’s tax treaty with Spain. For example. under a most-favored-nation clause in a protocol to the treaty. including interest paid to banks or insurance companies or interest derived from bonds or securities that are regularly and substantially traded on a recognized securities market. Certain limitations to the application of the preferential rates may apply. under a most-favored-nation clause in a protocol to the treaty.5% does not apply. However. the treaty rate of 22. the 5% rate applies unless an exemption applies. the 15% rate is replaced by any more beneficial rate agreed to by Chile in a treaty entered into with another jurisdiction. (jj) The lower rate applies if the recipient of the dividends is a company (other than a partnership) that owns directly at least 10% of the payer .(z) The lower rate applies if the owner of the dividends is the government or a government institution. provided the value of the investment amounts to at least €500. (aa) The 10% rate applies to interest paid to banks and insurance companies and to interest on bonds that are regularly and substantially traded. (mm) The 10% rate applies to interest paid before 1 July 2013. (cc) The lower rate applies if the recipient of the dividends is a company that owns either of the following: • at least 25% of the payer • at least 10% of the payer.000 or its equivalent (dd) The treaty rate is 15% for all types of interest.

merchandise or services (unless the sale of indebtedness is between related parties or where the beneficial owner of the interest is a person other than the vendor or a person related to the vendor). (oo) The lower rate applies if the beneficial owner is a company (other than a partnership) that holds directly at least 10% of the capital of the company paying the dividends for an uninterrupted period of 24 months. a 0% applies. if Poland enters into an agreement with an EU or EEA country that allows it to apply a rate that is lower than 5%. guaranteed or insured by an export financing organization that is wholly owned by the State of Poland. a 5% rate applies unless an exemption applies. • an EU/EEA company holds directly at least 25% of the share capital of both the beneficial owner of the royalties and the payer of the royalties. • the payer of the royalties holds directly at least 25% of the share capital of the beneficial owner of the royalties. • interest arising in Canada and paid to a resident of Poland with respect of a loan made. (qq) The lower rate applies to copyright royalties and similar payments with respect of the production or reproduction of literary. The 0% rate applies to such royalties if any of the following conditions is satisfied: • the beneficial owner of the royalties is a company (other than a partnership) that holds directly at least 25% of the share capital of the payer of the royalties. For royalties paid on or after 1 July 2013. any patent or for information concerning industrial. (rr) The agreement with the Socialist Federal Republic of Yugoslavia should apply to Bosnia- Herzegovina. musical or artistic work and royalties for the use of. (ss) The 5% rate applies if the recipient is a company (other than a partnership) that holds directly at least 25% of the capital of the company paying the dividends. guaranteed or insured by Export Development Canada. guaranteed or insured by Export Development Canada. such lower rate will also apply to royalties paid between Poland and Switzerland. Furthermore. (nn) For royalties paid before 1 July 2013. or the right to use. commercial or scientific experience (with some exceptions). 188 | Poland. • interest arising in Poland or Canada and paid to a resident of the other Contracting State in respect of indebtedness arising as a result of the sale by a resident of the other Contracting State of any equipment. (pp) The 0% rate applies to: • interest arising in Poland and paid to a resident of Canada with respect of a loan made. or a credit extended. The real state of real estate . guaranteed or insured by an export financing organization that is wholly owned by the State of Poland. • an EU/EEA company holds directly at least 25% of the share capital of both the beneficial owner of the interest and the payer of the interest. or a credit extended. the 10% rate applies if Switzerland imposes in its local provisions a withholding tax on royalties paid to nonresidents. Otherwise. dramatic.

The real state of real estate | 189 .Notes Poland.

The real state of real estate .Notes 190 | Poland.

The real state of real estate | 191 .Notes Poland.

The real state of real estate .Notes 192 | Poland.

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