PIT on rental via online platforms in Poland and tax obligations for foreign property rental income

Short-term rental of real estate via online platforms is becoming an increasingly popular way of earning income due to the possibility of easily reaching potential tenants. While contracting is becoming easier this is not always the case when accounting for taxes on this.

In this context, it should be noted that from 2023 onwards, rental income can be accounted for either as part of a business or as a so-called private rental. In the second case, the only form of income taxation is a lump sum from registered income.

Rental through an online platform as a private rental

As results from a recent interpretation[1] issued by the Director of National Fiscal Information, doubts may arise among taxpayers as to whether they should classify their income from short-term rental via an online platform as business activity or private rental.

This interpretation concerned the case of a taxpayer who was not engaged in business activity. The taxpayer was the owner of a single-family house in a tourist destination who plans to rent out part of the house to tourists via an online platform during the spring and summer seasons. The intermediary charged the owner a commission for his services, which he deducted from the rental income transferred to her.

The taxpayer had doubts as to whether she should set up and tax her income as a business in connection with the rental via the online platform.

The key conclusion of the tax authority was that, in the case of a taxpayer who is not engaged in business activity, the short-term rental of a flat constitutes a source of private rental income.

The Director of the of National Fiscal Information pointed out that the Personal Income Tax Act distinguishes between sources of income, among others, non-agricultural economic activity and rental. He also referred to a resolution of the Supreme Administrative Court adopted by a panel of seven judges (ref. II FPS 1/21), in which it was indicated that the taxpayer should decide whether to associate selected components of his or her property with the performance of business activities or to keep them in the management of non-business property.

Finally, the Director of the of National Fiscal Information explained that the taxpayer’s income from short-term rental is subject to taxation pursuant to the rules set out in Article 2 sec.1a and Article 6 sec. 1a of the Act on Lump-Sum Income Tax on Certain Income Earned by Natural Persons. The flat-rate tax on registered income is 8.5% for amounts up to PLN 100,000 and 12.5% on the excess over that amount. The income will arise upon receipt of funds through the online platform.

Taxation of property rental income of foreign Polish tax residents

While it seems clear that the rental of real estate located in Poland generates tax obligations on the part of landlords in Poland, taxpayers often do not realise that they should also report their foreign rental income in Poland and pay tax on it in Poland.

Such conclusions are drawn, inter alia, from the interpretation[2] of the Director of the of National Fiscal Information concerning income earned from the rental of real estate located in Portugal by a taxpayer who is a tax resident in Poland. As indicated in the application, the taxpayer earned income from an employment contract in Poland and from long-term rental in Poland. The above income is taxed and reported in the annual returns of Poland.

In addition, the Applicant earned income from short-term rental of real estate located in Portugal, on which the taxpayer did not pay tax in Poland.

As explained by the Director of the of National Fiscal Information, from 1 January 2021. MLI Convention changed the method of avoiding double taxation from the exemption method (exclusion with progression) to the method of proportional credit. Consequently, in accordance with the provisions of the Polish-Portuguese Convention, the income received from the rental of real estate located in Portugal was also taxable in Poland.

In view of the above, the taxpayer had:

• obliged to calculate a lump sum tax on rental income for each month and pay it to the account of the tax office, and
• to file a PIT-28 tax return, in which this income would be shown.

Similarly, the Director of the of National Fiscal Information [3] also ruled in a similar factual situation, concerning a property located in Spain. In this case, as it was explained, the amendment to the agreement as a result of the MLI applies to income earned from 1 January 2023.

Therefore, in light of the amended double tax treaty with Spain, when accounting for rental income, the taxpayer is required to include rental income earned and taxed in Spain in the PIT-28 tax return for 2023 filed by 30 April 2024.

On the other hand, the tax paid in Spain for 2023 is deductible when calculating the lump sum tax on income in Poland.

[1] DKIS individual interpretation of 15 January 2024 (ref. 0115-KDIT1.4011.774.2023.1.MR).

[2] DKIS individual interpretation of 27 December 2023 (ref. 0115-KDIT1.4011.714.2023.2.MN).

[3] DKIS individual interpretation of 24 August 2023 (ref. 0113-KDIPT2-1.4011.389.2023.2.MZ)