Structuring the investment
Similarly to other jurisdictions, real estate transactions in Poland are typically either structured as asset deals or share deals. In an asset deal, the real estate is acquired directly from its owner (being either an individual or a legal entity). In a share deal, the transaction encompasses shares in an entity that owns real estate. The decision as to which type of transaction to carry out will depend on the business needs of the parties to the contemplated transaction, and will vary on a case-by-case basis. Some of the most important factors to take into account would be the timeline of the transaction, its tax implications and the scope of due diligence to be conducted.
For tax reasons, two types of special purpose vehicles are most common on the Polish market as holders of real estates: limited liability companies and limited partnerships. These are considered as not causing obstacles with regard to their operation, and they are especially popular among investors (including foreign funds) as they are not subject to special regulatory restrictions with respect to the form in which the investment process shall be conducted. The income of limited liability companies is subject to corporate income tax, and in cases where dividends are payable or paid to the shareholders, income tax must further be paid thereon. A limited partnership is composed of one or more general partners and one or more limited partners. A limited partnership is an entity that forms an organisational unit with no legal personality; however, it may acquire real estate in its own name. Limited partners bear no management authority and are solely liable for debts incurred by the partnership to the extent of their registered investment. Therefore, general partners carry more liability in cases of financial loss. Very often, the general partner is a limited liability company. A limited partnership is not subject to taxation of income at the partnership level (corporate income tax or personal income tax), and only the partners are considered as taxpayers with respect to their income. Such tax benefits are the main reason why investors most commonly decide to form a limited partnership as a special purpose vehicle for carrying out commercial real estate projects.
Foreign acquisition of ownership rights or perpetual usufruct rights to real property is subject to restrictions provided for under the Act on the Acquisition of Real Estate by Foreigners, under which a foreigner is required to obtain a permit to be able to acquire real estate located on the territory of Poland. The term 'foreigner' is understood to be both a natural person that is not a Polish citizen and a legal person seated abroad; it covers also legal persons or entities seated in Poland but controlled (directly or indirectly) by foreigners. The permit is issued by the Minister of the Interior, provided that no objection is raised by the Minister of National Defence (and additionally, in the case of agricultural and forest real estate, by the Minister of Agricultural Development). Moreover, such a permit may also be required in the case of indirect acquisition of any of the above-mentioned titles to real estate (i.e., where a foreigner acquires shares in a company that owns or is a perpetual usufructuary of real estate within the territory of Poland).
Citizens or entrepreneurs from countries belonging to the European Economic Area are exempt from the obligation to obtain such a permit. The remaining restriction regarding agricultural real estate was eliminated as of 1 May 2016. However, new legislation that came into force at the end of April 2016 introduced further obstacles in acquiring and selling agricultural land for both foreign and domestic entities, including a ban on the sale of agricultural land by the state during the next five years and restrictions regarding entities that may acquire agricultural land. Because of the new legislation that largely limited the possibility of acquiring land for commercial purposes as well as the statutory right of first refusal enjoyed by the State Agricultural Land Agency, any transactions pertaining to agricultural real estate will require a higher level of due diligence and proper planning.
Tenants of agricultural real properties generally enjoy the right of first refusal in cases of sales of such properties, provided that the tenancy lasts at least three years.