Buy to let in Poland

Some of these descriptions may seem trivial. However, I agree with the approach. These descriptions serve to put a landlord’s mind at ease and sternly remind the tenant that they should treat the property as their own.

On the day the tenant moves in, it’s also necessary to read the electric meter, water meters and central heating meter. Ms Słotkowicz did just that and added the meter readings to the Protocol of Delivery and Acceptance.

Overall, Ms Słotkowicz did a wonderfully accurate and thorough job putting this protocol together. 

6. Dealing with a notary public and assuming the role of power of attorney

Ms Słotkowicz arranged a slot for my colleague at a notary public. An occasional lease agreement cannot be concluded without the participation of a notary public. 

The occasional lease agreement itself does not have to be concluded in the form of a notarial deed, i.e. with the participation of a notary. However, a notary public is involved in preparing one of the annexes to this agreement. This annex is the tenant’s declaration of submission to enforcement (oświadczenie o poddaniu się egzekucji).

Ms Słotkowicz offered my colleague to grant her power of attorney to deal with everything at the notary. He was confident that Ms Słotkowicz was on the ball with everything, so he didn’t hesitate to agree. Not to mention that Ms Słotkowicz’s proposal saved him paying 300-400 PLN for a Polish-English sworn translator.

7. Exclusivity and a personal touch

Signing an exclusive property lease agreement with an agency may bear fruit for foreigners seeking a super swift buy to let in Poland. 

My colleague signed an exclusive property lease contract with Nowodworski. In other words, my colleague had to refrain from activities aimed at acquiring tenants through the services of other real estate agents. 

So Ms Słotkowicz didn’t have any competitors. A chance for her to relax, right?

Not quite.

When the agent is aware that their work is going to result in a sure reward, they try harder to get a property rented.

Besides, exclusive contracts don’t last a lifetime. Indeed, Nowodworski concludes exclusive agreements for a period of two months. This was enough to give my colleague the confidence that Ms Słotkowicz would get the job done.  

 On the topic of “exclusivity”, Ms Słotkowicz said that: 

❝ Exclusivity is our way of sealing a meaningful collaboration with a client while also offering them all of the benefits the investment our agency subsequently spends on ensuring a frictionless rental of their property. These perks include unrivalled service and regular reporting, detailed tenant checks, property aggregation to over 80 property websites, video walkthroughs, careful home staging, pricing analysis, floor planning, professional cleaning and collaboration with corporate personnel relocation.

Overall, a combination of exclusivity and eagerness on the part of a well-trained agent was always going to produce a positive outcome. 

Types of lease agreements

Regular residential agreement

In Poland, landlords tend to use either one of two types of lease agreements when letting their property.

The first type of lease agreement is a regular residential lease contract (Umowa najmu lokalu mieszkalnego). This is a standard civil law contract with provisions that are regulated by the Civil Code. 

If I were a landlord, I’d never sign this standard agreement with any tenant. In the case of disputes, Polish law strongly protects the rights of tenants. If tenants do not pay their rent on time or refuse to leave the apartment, then the landlord may have problems evicting them. 

It’s possible that many landlords sign the standard contract so as to go unnoticed by notary officials and, ultimately, the tax office. 

Why should you sign a residential real estate occasional lease agreement with a tenant? 

A residential real estate occasional lease agreement (Umowa najmu okazjonalnego) offers increased protection to the landlord. This form of lease can only be used by natural persons who do not conduct business activity.

First of all, a landlord doesn’t need to endure lengthy court proceedings to evict a tenant with an occasional lease agreement. This is because the landlord is protected by the tenant’s declaration of submission to enforcement (oświadczenie o poddaniu się egzekucji). More on this declaration shortly.

On the subject of eviction, Ms Słotkowicz said:

❝ If a tenant chooses not to pay rent, the landlord cannot evict the tenant if they have nowhere else to stay, if they are of a certain age or if it is winter time. So, from this perspective, the removal of such a tenant could take anything up to ten years when it concerns a regular lease agreement. In such cases, an occasional lease agreement allows the landlord to start the eviction process much sooner.

I do not mean to scare potential landlords here. The vast majority of tenants are responsible people who pay their way in life. To put things into perspective, Ms Słotkowicz confirmed that:

❝ I have never personally encountered a potential tenant who has raised an objection [to an occasional lease agreement]. This kind of lease agreement shouldn’t be seen as something out of the ordinary. The trustworthy tenants have nothing to worry about and landlords can relax knowing they are protected against any unforeseen circumstances.

What does an occasional lease contract broadly consist of? 

My colleague’s contract is a sixteen-page document. It contains all the specific and general terms of lease which one would expect to find in a standard rental contract. Clauses relate to: 

• the delivery of the premises to the lessee
• duration of the agreement
• information about the rent, security deposit and administrative fees
• insurance
• the lessee’s rights and obligations
• the lessor’s rights and obligations
• lease agreement termination
• return of the premises
• final provisions

Execution of a demand to vacate the premises

Things begin to get interesting in section 9 of my colleague’s contract. This section is titled: Execution of a demand to vacate the premises.

Now, we come to the aforementioned declaration of submission to enforcement which a tenant has to sign at the notary public. 

The first annex of four is the lessee’s declaration of submission to enforcement in connection with the occasional lease agreement (oświadczenie o poddaniu się egzekucji). This is a declaration in the form of a notarial deed, in which the lessee subjects himself to enforcement. In other words, the lessee undertakes to vacate and surrender the premises within a specified time limit. 

In the contract, point 4 of section 9 states that: 

After the expiry or termination of the Agreement, if the Lessee has not voluntarily emptied the Premises, the Lessor shall deliver to the Lessee a written request to vacate the Premises along with an indication of the date in which the Lessee and the persons residing with him shall empty the Premises. The above-mentioned date shall not be shorter than 7 days from the date of delivery of the request.

In the event of an ineffective expiry of the time limit referred to in point 4, the lessor has the right to submit to the court an application for granting an enforcement clause to the aforementioned notarial deed.

The court will consider a request within three days, after which an expedited eviction procedure will begin. This may occur during the winter months, something which a standard lease contract does not allow by law. Moreover, neither minors nor pregnant women are protected against any potential eviction procedure.

Which other statements relate to the execution of demand to vacate the premises?

The second annex is a statement containing the lessee’s indication of another premises in which the tenants will be able to reside in the event of execution of the demand to vacate the rented premises. This is referred to as Wskazanie przez Najemcę innego lokalu in Polish. For this, the lessee wrote and signed a handwritten declaration.

The third annex is a declaration of consent to the lessee’s residence in another premises (oświadczenie o wyrażeniu zgody na zamieszkanie najemcy w innym lokalu). Here, the owner of the premises referred to in the second annex provided consent to the residence of the tenants should they be evicted. 

The fourth annex is the protocol of delivery and acceptance, which I’ve already written about.

Tax affairs

After finishing all the paperwork and handing over the property to the tenants, my colleague made his way to the tax office to report his forthcoming rental income.

Let’s check the steps involved when it comes to setting one’s tax affairs in order:

1. Notify the tax office of an occasional lease agreement 

In the case of an occasional lease agreement, the landlord should notify the tax office within 14 days from letting the apartment.

You may download a model notification form here. Accept the terms and conditions (Akceptuję regulamin serwisu jakiwniosek.pl) then Click on ‘Pobierz dokument’.

The notification informs the tax office of the date from which the contract was concluded. There are also spaces to fill in the landlord’s personal details and also the address of the apartment.

My colleague filled out this form and took it with him to the tax office. He had other duties to carry out there, as we shall now go into.

2. Registration of a natural person who is a taxpayer 

Aware that my colleague hadn’t yet registered as a taxpayer in Poland, the clerk gave him the ZAP-3 form to fill in.

The ZAP-3 is for natural persons, whose tax identifier is their PESEL number. My colleague has had a PESEL number for several years.

Natural persons are those who do not conduct business activity, are not registered as VAT payers, and do not pay taxes or social security contributions.

On the ZAP-3, the taxpayer has to fill in basic information such as personal details, home address, correspondence address and personal bank account details. 

3. Decide on a taxation rate of rental income

A landlord (not conducting business activity) may choose one of two existing forms of taxation of rental income:

Progressive income tax scales:

First of all, private rental can be settled according to the income tax bands in Poland (17% and 32% of income). The 17% rate applies to income not exceeding 85,528.00 PLN per year. Rental income is added to the income from other sources, for example, from an employment contract. Therefore, there is a risk of entering the 32% tax band. 

These income tax scales are mostly applicable to entrepreneurs who conduct business activities. Landlords who rent several premises should settle accounts as entrepreneurs, especially if they have no other income. 

These income tax bands are also advantageous to landlords who may deduct expenses related to the apartment from the income obtained from the lease. 

The sheer range of costs that can be deducted is very extensive. For example, mortgage interest, home insurance, repairs and the purchase of equipment are all feasible expenses. 

In order for a given expense to be considered a cost, it should be properly documented. In other words, a landlord should keep invoices or bills.

Lump sum tax rates:

In contrast to paying tax according to one of the income tax scales, a landlord may choose to pay a lump sum. 

From 2018, a lump sum rate of 8.5% applies to income up to the amount of PLN 100,000. A rate of 12.5% ​​applies to the surplus over PLN 100,000. 

My colleague was aware that he wouldn’t have any significant expenses related to the apartment. For instance, he doesn’t have a mortgage to pay off. Moreover, he didn’t have to carry out any repairs in the apartment. Therefore, the 8.5% rate was the most appealing option for him.

In an occasional lease contract, it’s vital to state that the tenant will bear fees related to the premises. These fees include electricity, water, gas and monthly communal fees (czynsz). If the contract does not explicitly state that the tenant will cover these fees, yet the tenant still transfers money into the landlord’s account for them, this income is taxable.

If the landlord decides to pay tax in the form of a lump sum, he should submit a written declaration of this choice to the tax office. The deadlines for informing the tax office of this choice are as follows:

• until February 20, if the first income is in January
• by the twentieth day of the SUBSEQUENT month in which the landlord obtained the first rental income
• until the end of February (when the tax year ends), if the first such income appears in December

A delay in submitting a declaration results in the loss of the right to choose a lump sum rate. Under such circumstances, the landlord has to pay taxes according to the progressive income tax scales.

4. Pay tax into an individual micro-account

So, my colleague informed the tax clerk of his preferred way to pay tax. Thereafter, the clerk set up an individual tax micro-account for him.

This micro-account is an individual tax account which is used for PIT, CIT and VAT payments.

My colleague’s identification number is his PESEL number.

In sum, my colleague was obliged to transfer 8.5% of the total rent to his micro-account by the twentieth day of the month following receipt of the first rental fee. 

Further information about tax micro-accounts can be found here.

5. Submit PIT-28 for lump sum settlements by the end of the tax year

The final piece of the puzzle for my colleague was to file his taxes for 2020.

Taxpayers who choose a lump sum settlement have to submit the PIT-28 tax form.

For the 2023 tax year, the deadline for filling in the form is April 30, 2024.

Is now the time to invest in real estate in Poland?

I am confident that cash buyers who are not afraid to partake in some hard bargaining would be able to grab a fabulous rental yield in any major Polish city. By fabulous, I mean anything over 5.5%.

Let’s also not forget the prospect of significant capital appreciation of Polish real estate in the future.

Don’t be put off by the bureaucratic procedures mentioned in this article. Polish bureaucracy is much easier to handle than it used to be. Besides, a professional real estate agent can do most of the heavy lifting for you.

If you’re in Gdańsk, Wrocław, Warsaw or Kraków, do contact Nowodworski Estates to help you buy and let an apartment.