Invest in apartments and get your VAT back!
Every investor purchasing an apartment, regardless of whether they run a business or not, is entitled to a full VAT deduction. Therefore, when purchasing an apartment, you only bear the cost of the apartment’s net value!
Pursuant to Article 86 paragraph 1 of the Act of 11 March 2004 on the tax on goods and services [hereinafter referred to as the “VAT Act”], to the extent that goods and services are used to perform taxable activities, the taxpayer is entitled to reduce the amount of tax due by the amount of input tax.
It should be emphasized that performing taxable rental activities on a small scale does not have to involve the obligation to register business activity, as referred to in the Act of 2 July 2004 on the freedom of economic activity. In your case, renting an Apartment should not therefore be associated with such an obligation.
In order to exercise the right to deduct VAT when purchasing an apartment, you should:
1. Register as an active VAT payer. For this purpose, in accordance with Article 96, paragraph 1 of the VAT Act, it will be necessary to submit a VAT-R registration form to the tax office competent for the place of performance of activities subject to VAT. In the event that the rental of the apartment is the only activity subject to VAT, the entity competent to submit the VAT-R form will be the head of the tax office in the given location. The date of waiver of the right to exemption from VAT taxation should be indicated as the date of payment of the first advance payment for the purchase of the apartment or the date of signing the preliminary sale agreement for the apartment (depending on which of them falls earlier).
2. Include, in accordance with Article 109, paragraph 3 of the VAT Act, invoices received from the seller of the apartment documenting subsequent payments for the purchase of the apartment (on which the taxpayer’s NIP will be visible) in the VAT purchase register.
3. Issue VAT invoices documenting receivables from the rent and include them in the VAT sales register.
4. Submit, in accordance with Article 99, paragraph 1 of the VAT Act, VAT returns in which you will indicate the value of tax due and input. The rule is to submit VAT-7 returns monthly, by the 25th day of the following month. We inform you that, in accordance with Article 99, paragraph 2 of the VAT Act, you also have the option of choosing the quarterly settlement method. If, when starting your business, you decide to use the quarterly method, you should submit a statement of your choice of the quarterly settlement method to the head of the tax office by the 25th day of the month following the month in which you started performing taxable activities.
5. In the tax return, you can:
a) reduce the amount of tax due on the sale made in a given month (quarter) by the amount of tax charged on the purchase of the apartment (in practice: until the first invoice for rent is issued, there will be no such option);
b) transfer the excess of input tax over output tax to subsequent settlement periods;
c) submit an application for a refund of the excess of input VAT.
Pursuant to Article 87 of the VAT Act, VAT is refunded to the taxpayer’s bank account:
a) within 60 days from the date of submission of the settlement by the taxpayer, if the taxpayer has performed the tax during the settlement period (the tax office official may extend this period);
b) at the taxpayer’s request, within 25 days from the date of submission of the declaration, if the amounts of input tax shown in the tax declaration result, among others, from invoices documenting receivables that have been paid in full;
c) within 180 days from the date of submission of the settlement by the taxpayer, if the taxpayer has not performed a taxable transaction during the settlement period.
In practice, therefore, you must expect a 180-day VAT refund deadline or decide to transfer the excess to subsequent settlement periods. This will be especially beneficial if you register as a VAT payer shortly before the expected receipt of the first rent.
Buyers running a business activity
Persons purchasing the Apartment who already run a business activity and have the status of an active VAT payer, deduct VAT on expenses incurred for its purchase in the month (quarter) of receiving the invoice documenting these expenses, according to the methodology presented above for persons not running a business activity registered with the commune office.
Persons who, while conducting business activity, have so far benefited from the VAT exemption referred to in Article 113 of the VAT Act, in order to obtain a VAT refund on the purchase of the Apartment, will be required to waive this exemption and submit a VAT-R registration application. In accordance with Article 113, paragraph 4 of the VAT Act, the condition for waiving the exemption is to submit a written notification to the head of the tax office before the beginning of the month in which the exemption is waived. The notification of waiver of the exemption should therefore be submitted before the beginning of the month in which the first advance payment is made, preferably before signing the preliminary apartment sale agreement.
IMPORTANT!
In the event of waiving the exemption, you will be required to charge VAT on all sales made by you as part of your business activity, not only those resulting from the rental of the apartment.
VAT can be deducted from the purchased apartment by:
a) reducing, in accordance with Article 86, paragraph 1 of the VAT Act, the amount of tax due resulting from the sale taxed in a given settlement period by the input tax resulting from invoices documenting the purchase of the Apartment;
b) in the event that the amount of tax charged in the settlement period is higher than the amount of tax due, in accordance with art. 87 sec. 1 of the VAT Act, you have the right to reduce the amount of tax due for the next settlement periods by this difference or to refund the VAT to your bank account.
Do you need help with VAT settlement? Contact our accountant: tel. +48 504 681 762