Higher property purchase tax in Poland from 2024 will hit small and medium-sized investors

When purchasing property on the secondary market in Poland it is obliged to pay property purchase tax (abreviated in Polish: PCC) which is 2% of the transaction value. This tax is collected by the notary after signing the purchase agreement.

When purchasing properties on the primary market currently pay 8% VAT.

As part of the amendment to the regulations on the transformation of perpetual usufruct into ownership, in August 2023, people buying their first apartment were exempted from this purchase tax and it was decided that some people buying the sixth and subsequent apartments would pay a higher rate.

From January 2024 people buying the 6th and subsequent apartments will pay as 6% PCC when purchasing some residential properties. However, this tax will only apply if all of the following conditions are met:

1. Property is residential – which means that the higher tax will not apply to the purchase of commercial premises
2. The property constitutes a separate premise – which means that it must be separated in accordance with the Act on the ownership of premises (with separate perpetual book numbers), therefore the provision does not apply to the purchase of entire buildings with non-separated apartments
3. The sixth and subsequent independent residential properties are purchased within the same plot of land – it often happens that the housing estate built by the developer is located on several plots
4. The sale is subject to VAT – which applies mainly to the primary market
5. There are the same parties of the transaction – there is no time limit, so if an investor purchases 3 separate residential premises within one plot of land from developer XYZ, and after a year purchases 5 more from him within the same plot, then 6, 7 and 8 premises will be taxed at 6% PCC.

In summary, this means that anyone buying more than 5 apartments from a developer in the same development will pay the higher tax.

In the case of purchasing residential property as joint ownership, a higher tax will apply if at least one of the co-owners meets the above conditions.

The purpose of introducing a higher property purchase tax is to limit bulk and speculative purchases on the market, which theoretically reduces the supply for people buying for their own housing purposes. In reality, the new regulation will hit small and medium-sized investors. Companies from the PRS sector that buy apartments in bulk for rent will be able to easily obey the new regulations by purchasing entire buildings, without the need to separate apartments.

Since the new regulations come into force from 1st Jan 2024, it is further driving demand on an already hot apartment sales market, which is already heated by the 2% loan for first-time buyers from the government and low supply.