Sale of several plots of land not always with income tax

A natural person in 2015 acquired several undeveloped land properties to their personal estate for private purposes (recreation). At the time of their purchase, no further resale was intended, however, due to a change in life plans, the decision was taken to sell them. To this end, the owner carried out activities aimed at the re-drawing of boundaries, division of plots and obtained a zoning decision for the properties. In connection with this type of activity doubts arose as to whether the planned transactions would be subject to personal income tax.

The issue of taxation of the sale of several real properties depends on whether transactions of this type fall within the limits of ordinary management of private assets (in which case they are not subject to income tax if the sale takes place after the lapse of five years, counting from the end of the calendar year in which the purchase took place) or whether they show the characteristics of professional trade (in which case they are taxed as income from business activity). On behalf of our Client, tax adviser Iwona Jacieczko and Wojciech Jankowski from the Tax Advisory Department submitted a request for an individual interpretation to the Director of the National Fiscal Information in this respect. In response to this request, the tax authority fully shared the standpoint of our tax advisors and stated that the activities undertaken by our Client are not of a professional nature ascribed to entrepreneurs and fall within the scope of ordinary activities connected with proper management of one’s own assets. Consequently, the Director of the National Fiscal Information confirmed that the sale by our Client of the plots of land acquired in 2015 would not be carried out in the performance of business activity therefore no obligation to pay income tax on this account would arise.

As a result of our Law Firm’s actions, our Client can safely carry out the planned transactions without fear of a dispute with the tax authorities, which could demand payment of tax on these transactions. According to the provisions of the Tax Ordinance, compliance with an individual interpretation cannot be detrimental to the applicant.