Tax on the purchase of multiple dwellings

In recent years, there has been a clear trend in the property market of an increasing interest in the purchase of multiple dwellings as a form of investment. However, not everything is going well for those who want to take advantage of this business model. Changes to the civil law transaction tax (PCC) regulations from early 2024 have the potential to significantly affect the attractiveness of such investments.
The civil law transaction tax is a form of taxation on transactions, most notably the purchase of real estate. The market value of the property is the basis for taxation on the sale contract, and the tax rate is set at 2%. To date, investors acquiring multiple properties have also been subject to a 2% tax rate.
Introduced as of 1 January 2024, the changes to the law aim to rebalance the real estate market by discouraging the mass purchase of housing for investment purposes. The additional tax burden may reduce the profitability of such investments, which in turn may affect the investment decisions of private individuals and investment entities.
As part of the amendment concerned, Article 7a was introduced into the Act on tax on civil law transactions, according to which in a situation where the purchaser acquires at least 6 residential premises constituting separate real estate in one or several buildings constructed on one land property, which are subject to tax on goods and services, or owns shares in such premises, or has already acquired at least 5 such premises or shares in them, the rate of tax on a subsequent sale agreement covering the 6. premises and each subsequent premises in the same building or buildings, or an interest in such premises, shall be 6%.
The new tax on multiple dwellings will not apply in situations where the same purchaser buys at least six dwellings but located on different plots. Investors will therefore have to consider diversifying their investments in order to optimise tax costs.
Furthermore, such transactions, are subject to VAT and, exceptionally, the legislator has allowed these taxes to accumulate. As a result, the buyer bears the burden of both the 6% PCC tax and the economic burden of VAT, which for private individuals is not deductible.
In addition to the direct effects on investors, such as a reduction in profit margins, the long-term implications for the property market must also be considered. On the one hand, the changes may help to stabilise prices in the housing market and increase the availability of housing for those wishing to purchase for their own use. On the other hand, there is a risk that the restrictions may discourage investment in new housing projects, which may affect the housing supply in the long term.

Author: Przemysław Siwik