When the sale of business-used real estate is exempt from VAT in Poland

Paweł Gorzelec
Dec 19
3 min read

One of the most common VAT issues in practice concerns the correct tax treatment of the sale of developed real estate that has been used in a taxpayer’s business activity for many years. Particular doubts arise with respect to the scope of the VAT exemption provided for in Article 43(1)(10) of the Polish VAT Act, especially where the property was originally part of the taxpayer’s private assets and was only later introduced into business activity.

Important guidance in this area is provided by an individual tax ruling issued by the Director of the National Revenue Information (KIS) on 24 October 2025 (reference no. 0114-KDIP1-1.4012.814.2025.2.MKA). The ruling concerns the planned sale of a property developed with a commercial building that had been used in business activity for more than ten years.

This article refers exclusively to the Polish VAT system and the VAT exemption applicable under Polish law.

Facts of the case

The case involved an active VAT taxpayer conducting a sole proprietorship. The land on which the building was constructed had been acquired by way of donation and initially formed part of the taxpayer’s private assets. The taxpayer subsequently constructed a commercial building on the land, which in 2012 was entered into the fixed assets register of the business and depreciated for tax purposes.

From 2013 onwards, the property was continuously leased for the purposes of operating a kindergarten. Importantly, throughout the entire period of use, no improvement expenditures exceeding 30% of the initial value of the building were incurred.

The taxpayer planned to sell the property in 2026 and requested confirmation that the transaction would qualify for a VAT exemption.

Sale as a VAT taxable activity – not private asset disposal

A key element of the ruling is the clear position taken by the tax authority that the sale of the property does not constitute the disposal of private assets.

The Director of KIS emphasised that since the property:

was used in the course of business activity,
was recorded in the fixed assets register,
generated taxable rental income,

its sale must be treated as a transaction carried out by a VAT taxpayer acting in that capacity, within the meaning of the Polish VAT Act.

This confirms the well-established interpretative line according to which the decisive factor is the actual manner in which the property was used, rather than the original source of its acquisition.

First occupation and the two-year period

Another crucial aspect of the analysis was whether the building had been subject to first occupation, as defined under the Polish VAT Act.

The tax authority confirmed that first occupation occurred no later than at the moment the building was put into use and the lease commenced. Consequently, the period between first occupation and the planned sale significantly exceeded the statutory two-year threshold required for the VAT exemption to apply.

Furthermore, since no improvement expenditures exceeding 30% of the initial value were incurred, no new first occupation occurred that could have excluded the exemption.

VAT exemption also applies to the land

It should also be noted that where the supply of a building benefits from a VAT exemption, the exemption also applies to the land on which the building is situated.

In practice, this means that the entire transaction is treated uniformly for VAT purposes, without the need to separately allocate the value of the land.

Practical significance of the ruling

This individual ruling is of significant practical importance for taxpayers planning the sale of real estate used in their business activity. It confirms that long-term business use of a property, combined with the absence of substantial improvements, allows for the safe application of the VAT exemption under Article 43(1)(10) of the Polish VAT Act.

Before deciding whether a transaction should be exempt from VAT or subject to taxation, it is essential to carefully analyse:

the history of the property’s use,
the dates on which it was first put into use,
the scope and value of any improvement expenditures.

Important: VAT exemptions are exceptional in nature and may only be applied if all statutory conditions are strictly met. In practice, this makes proper documentation and accurate fixed assets records a key element of tax risk management.