Does the sale of land always trigger VAT? It turns out that the answer is no – even if certain actions aimed at increasing the attractiveness of the property are taken before the sale. The key issue is who actually carries out those activities.
The case concerned an individual planning to sell a property consisting of several plots of land. The plots had been acquired under a conditional sale agreement and a subsequent transfer of ownership agreement. The plots were not acquired from the State Treasury or a local government unit and had access to a public road. The acquisition of the property was not documented by an invoice, and no VAT was deducted in connection with its purchase. Furthermore, no resolutions concerning redevelopment had been adopted with respect to the plots, and they were not covered by a forest management plan.
A buyer had already been identified for the planned transaction, and no real estate agents were involved. The company interested in purchasing the land approached the seller on its own initiative. The company intended to use the property for a construction project involving the development of a retail and service building together with accompanying infrastructure, as confirmed in a notarial deed. Under the preliminary sale agreement, the company undertook to complete all formalities related to the planned investment.
For this purpose, the company obtained a power of attorney authorizing it to secure a building permit, a permit for tree removal, conduct environmental contamination tests, perform geotechnical examinations regarding the feasibility of constructing the planned building, and obtain technical conditions for utility connections. Although these activities could potentially increase the attractiveness of the property, they had no impact on the agreed sale price, which was already below market value.
In light of the above, an application for an individual tax ruling was submitted to determine whether the sale of the plots would be subject to VAT without the possibility of applying the exemption provided for in Article 43(1)(9) of the Polish VAT Act.
The applicant took the position that the transaction should be subject to VAT. In the applicant’s view, the actions undertaken by the company acting as attorney-in-fact went beyond ordinary management of private property and were typical of professional market participants. Furthermore, obtaining the permits increased the value of the land. According to the applicant, it was irrelevant that the company acted partly in its own interest because, even if the sale ultimately did not take place, all permits obtained would remain valid. The applicant also argued that the company’s activities should affect the seller’s status as a VAT taxpayer.
Regarding the VAT exemption, the applicant maintained that, due to the activities carried out by the company, the plots would lose their character as non-building land. This conclusion was supported by the issuance of zoning and development conditions qualifying the plots as building land.
The tax authority disagreed with this position.
Referring to the facts of the case, the authority emphasized that the power of attorney had been granted solely to obtain the permits and approvals necessary for the planned investment. Obtaining these decisions constituted a condition for completing the sale transaction.
The authority noted that although these activities were performed before the final sale agreement was concluded, granting a power of attorney to the company could not be equated with active efforts by the landowner to increase the attractiveness of the property. The fact that the buyer independently approached the seller further demonstrated that there was no need for the owner to undertake marketing or investment activities.
The authority also pointed out that, while the company’s actions as attorney-in-fact formally concerned the property owner, they could not be treated as actions taken by the owner personally. Moreover, the activities were undertaken primarily in the buyer’s own interest and had no effect on the final purchase price to be paid under the sale agreement.
Consequently, the authority concluded that merely granting a power of attorney and allowing the buyer to carry out activities necessary to obtain the required permits did not result in the seller being treated as a person conducting an economic activity for VAT purposes.
As a result, the sale of the property was considered a disposal of private assets carried out within the seller’s personal sphere rather than a business activity. Therefore, the transaction fell outside the scope of the Polish VAT Act.
The ruling confirms that activities undertaken by a prospective buyer to prepare land for a planned investment do not automatically transform a private seller into a VAT taxpayer. When assessing whether a property sale is subject to VAT, it is essential to examine who actually performs the preparatory activities and whose interests those activities serve.