Partner, Head of Real Estate at CMS Poland

The year 2019 saw a  lot positive changes in the regulatory environment in Poland as regards to real estate transactions and property development.

In December 2018 the Ministry of Finance published guidelines as to the VAT treatment of real estate deals. The market practice developed in the course of 2019 and now most asset deals are again subject to fully recoverable VAT. For several years, it was not clear whether the sale of an income-producing real estate was subject to VAT, and this ambiguity caused concern to investors when they applied for VAT refunds.

Another change involves the relaxation of the rules on agricultural land acquisition. Although it primarily concerns agricultural land sales, it has an impact on many other real estate transactions. The new rules allow anyone to acquire agricultural land with an area smaller than 1 hectare, subject only to a government pre-emptive right. The previously binding regulations imposed restrictions on the acquisition of plots as small as 3,000 square meters. Furthermore, as of 2019 an acquisition of shares in companies holding less than 5 hectares of agricultural land is no longer limited by any government pre-emptive rights, whereas the previous limit was also 3,000 square meters.

2019 also saw the introduction of a partial reform of a very common title to land, namely perpetual usufruct over government land. Perpetual usufruct often has burdensome use limitations and the procedures to change them were unclear, time consuming and very expensive. As of 2019, a holder of a perpetual usufruct right is entitled to demand changes in the permitted purpose, subject to a reasonable fee.