The sale of real estate is classified as a supply of goods for consideration under the Polish VAT Act. As a rule, this applies to both developed and undeveloped land. However, the regulations provide for a VAT exemption, provided that the conditions set out, inter alia, in Article 43(1)(9) of the VAT Act are met.
The key factor in determining whether the exemption may apply is the designated use of the land resulting from the local spatial development plan or – in its absence – from a zoning decision (development conditions decision). It is the formal legal designation, rather than the actual use of the land, that determines whether it qualifies as building land.
Pursuant to Article 43(1)(9) of the VAT Act, only the supply of undeveloped land other than building land may be exempt from VAT. The definition of building land set out in Article 2(33) of the Act states that it is land designated for development in accordance with a local spatial development plan or, in the absence of such a plan, in accordance with a zoning decision. This means that the classification of a plot as building land does not depend on its technical condition, level of infrastructure, or whether the owner has undertaken any development activities.
In practice, tax authorities consistently indicate that if a local spatial development plan provides for any development function for a given plot, the entire plot is treated as building land, which excludes the application of the exemption under Article 43(1)(9) of the VAT Act. This approach is confirmed by the Director of the National Revenue Information in the ruling of 17 April 2025 (ref. 0114-KDIP1-3.4012.180.2025.2.PRM):
“(…) the undeveloped plot separated from plot No. 1 will constitute building land, as defined in Article 2(33) of the Act, and consequently its sale will not benefit from the VAT exemption under Article 43(1)(9) of the Act.”
The authority did not distinguish in any way between parts of the plot not intended for development (such as road areas), treating the entire plot as building land.
A similar position was presented in the ruling of 23 April 2025 (ref. 0114-KDIP1-3.4012.153.2025.2.PRM). In that case, the plot was designated in the plan both for services and for green areas and a public road. Nevertheless, the authority stated:
“(…) undeveloped plot No. 1 is covered by a local spatial development plan (…). Thus, as at the date of supply, the undeveloped plot No. 1 will constitute building land, as defined in Article 2(33) of the Act, and consequently its sale will not benefit from the VAT exemption under Article 43(1)(9) of the Act.”
This practice means that the functional division of a plot in a local plan does not translate into a “tax division.” A plot as a real estate unit is treated uniformly for VAT purposes – if any part of it is designated for development, the entire property is classified as building land. Tax authorities consistently reject a proportional approach and interpret the definition of building land broadly in every case.
The situation may be different where the plot is not covered by a local plan and no zoning decision has been issued. In such a case, the plot remains land other than building land, and its sale may benefit from the exemption under Article 43(1)(9) of the VAT Act. The key factor, however, is the absence of formal documents permitting development. If, at the time of sale, a zoning decision exists, the entire plot becomes building land. As indicated by the Director of the National Revenue Information in the ruling of 17 April 2025 (ref. 0114-KDIP1-3.4012.180.2025.2.PRM):
“Thus, as at the date of supply, the undeveloped plot separated from plot No. 1 will constitute building land, as defined in Article 2(33) of the Act, and consequently its sale will not benefit from the VAT exemption under Article 43(1)(9) of the Act.”
If a plot qualifies as building land, it is not possible to apply the VAT exemption for small taxpayers under Article 113(1) of the VAT Act, as the legislator explicitly excludes supplies of building land from this exemption. It is also not possible to apply the exemption under Article 43(1)(2) of the VAT Act if the acquisition of the plot was not subject to VAT, which is typically the case when the land was purchased from a private individual, inherited, or received as a gift. Tax authorities emphasise that the absence of input VAT on acquisition precludes the application of this exemption.
In conclusion, the decisive factor determining the availability of the VAT exemption for the sale of undeveloped land is its designation resulting from a local spatial development plan or a zoning decision. If even part of the plot is intended for development, the entire plot is treated as building land and its sale is subject to VAT. The interpretative practice reflected in the cited rulings of the Director of the National Revenue Information demonstrates a consistent and broad understanding of the concept of building land.