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Poland One of the Cheapest Locations for Property Investors

Poland One of the Cheapest Locations for Property Investors

Research conducted by Taxand, the world's largest global organisation of tax advisors to multinational businesses, has shown that Poland is one of the cheapest countries in the world in which to invest in commercial real estate.

The total tax take on selling a commercial property, currently 4.28%, is the third lowest of the 23 countries analysed in the research behind only Romania and Cyprus who have rates of 4.02% and 2.74% respectively. It also offers buy-t0-let investors of residential properties good value, with only 25% of total rental income recovered in taxes compared to the highest rate of 50% in China.

Poland also has one of the lowest tax rates for selling a residential property with just 11.04% of the value taken in total. The country was again third cheapest, with only the UK (6.39%) and Malaysia (5.34%) boasting lower rates.

The results of the Taxand study provide interesting reading for property investors considering which regions have the potential to generate the greatest return on investments in Europe.

Pawe? To?ski, Partner with Crido Taxand in Poland, said:

"The relatively small income tax in Poland is a factor in explaining the low tax rate on commercial property in Poland, though the key reason behind this percentage is the fact that VAT is recoverable on a commercial investments and VAT on leases can be deducted by the tenant. In some other countries, investment VAT is non-deductable, meaning that Poland has relatively favourable conditions for investment in this sector."

The research also revealed interesting results regarding the taxes on commercial property rental which, in Canada, is costing investors a massive 53.85% of total income, pitching Canada well ahead of other jurisdictions. Canada's rate of total tax is over 12% higher than the US which has the second highest rate of taxation on commercial property rental at 41.17%, followed by Norway (36.34%).

The alarmingly high total tax rate in Canada is largely the combined result of high levels of both income tax, which stands at a rate of 30%, and real estate tax at 3.60%.

Keith O'Donnell, Global Head of Real Estate at Taxand, said:

"Our second review of total tax take in the global real estate market has revealed some fascinating insights, with Canada now topping the rankings as the most expensive country for commercial property rental and Norway the most expensive location for commercial sales.

"It is particularly interesting to see the significant year-on-year changes in total tax take introduced on commercial rental in certain countries. The overall decrease has undoubtedly prevailed as a result of competition for inward investment in the wake of the global financial crisis. Whilst governments will undoubtedly have considered an increase to plug budgetary deficits, authorities are clearly more concerned about the potentially disastrous knock-on effect that could be caused by a depressed property market."


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Taxand T3 research methodology

Taxand has updated and expanded last year's T3 data.

To arrive at the figures, Taxand has taken into account VAT (or its local equivalent), corporate income tax, and property taxes. The property taxes were usually subject to country specific assumptions and modifications as they often differ on a municipality basis or sometimes just location basis.
Those were reviewed by the coordinating Taxand team to assure comparability. Administrative fees, notary fees, court fees were excluded as having a relatively low impact on the overall tax take.

To ensure comparability of the results, certain data has been fixed such as size of the building, investment costs, and 100 percent non-interest bearing equity financing. With all of that built into the model, each real estate team from Taxand adopted it to the local law to ensure comparability.

Taxand T3 is a global research tool. Initial findings have focused on reviewing major jurisdictions. Other interesting findings include the high tax take on property in the healthcare sector, commercial property sales and income. The research will be carried out on an annual basis to establish year on year trends.

Your Taxand contact for further queries is:
Abigail Tarren, Global Operations Director
T. +44 (0)207715 5243


Taxand's Take

Taxand's Take Author