Sale of real estate without VAT – favourable judgment for the Law Firm’s Client

In 2015, our Client acquired undeveloped land properties constituting forest land into his personal assets intended for private purposes. He was engaged in business not connected with the real estate trade. He was not an active taxpayer of the goods and services tax. In 2019, he decided to sell the acquired properties. In order to do so, he took steps, inter alia, to re-establish the boundaries, to divide the plots in question, and to obtain a zoning decision for the properties. However, the Client developed doubts as to whether the potential sale of the above-mentioned plots of land would:

– constitute income earned as part of a non-agricultural business and would therefore be subject to taxation as provided for in respect of income earned from such business,

– be subject to taxation with the goods and services tax.

In view of the different definitions of business laid down in the Income Tax and Goods and Services Tax Acts, the Law Firm requested the Director of the National Revenue Information to issue an individual interpretation in this respect.

Having examined the first of the applications, the tax authority found that the Applicant’s position was correct. It pointed out that the planned sale of the plots would not be associated with business and would not take place in the performance of business, therefore the Applicant would not be required to pay income tax on this account. 

As regards the second of the applications, the authority issued an interpretation unfavourable for our Client, indicating that as regards the acquired plots of land, the Applicant undertook actions characteristic of professional real estate trade, which excluded the sale of the plots of land in question as part of private assets management. In the opinion of the authority, the supply of the plots of land in question would be subject to the VAT.

The Law Firm challenged the above interpretation by filing a complaint with the Voivodship Administrative Court in Warsaw prepared by tax advisor Iwona Jacieczko and Wojciech Jankowski from the Firm’s Tax Law Department.

As a result of the complaint, the court issued a judgment favourable for our Client, overturning the appealed interpretation. In its grounds, the Court indicated that in accordance with the current case-law, the scale of activities undertaken by our Client in relation to the plots purchased did not exceed the scope of activities undertaken as part of management of his own assets.

To sum up, the court indicated that in the presented circumstances our Client cannot be treated as a taxpayer of the goods and services tax.

The court ruling demonstrates yet another success and effectiveness of the Firm’s Tax Law Department.