Poland Property Buying Guide

Buying overseas involves a lot more time and effort than buying in your own country.

Despite being in the EU, there are many different legal and tax issues which are distinct in each country. Although there are many reasons to buy abroad, those looking to invest in another country, rather than live should be aware that although properties might seem cheaper, the costs of buying and selling are much higher. Therefore capital growth and yield will have to be much higher than headline figures quoted often in the media.

Furthermore consideration of local incomes and rental prices are of paramount importance.

If you are looking to relocate and live in another country then taxes, particularly inheritance and pensions transferability are more important.

For further information please refer to our country guides. To see local prices and rentals in the country you want please use the search engine. Remember the prices that you see are the local prices not inflated to overseas buyers.

Before buying in Poland you need to consider the same factors as buying in you own country (please see buying tips Link.)

Due to prices being much lower than the rest of Europe, there are some restrictions on where you can buy. These will be gradually phased out between 2009 (for an investment property) and 2016 (for agricultural land). They were put in place to stop property and land becoming unaffordable to the local population, which could in turn have caused high inflation. These permits are more restrictive close to the German border for obvious reasons.

There are no restrictions for European Union or EFTA nationals to purchase and own any real estate providing it is less than 0.4 hectare (i.e. about an acre) in urban areas. For larger plots, farmland and forests authorization is required from the Ministry of Internal Affairs.

Other nationalities, companies or when an individual is acquiring more than a 50% interest in a business with real estate among its assets require authorization from the Ministry of Internal Affairs before purchasing property. Normally this is obtainable in most cases without any problems.

After applying, the Polish Ministry of Internal Affairs will issue ‘Permit Promise’, valid for six months allowing them to purchase property subject to the criteria specified within this timeframe.

A common question arises, if is possible that a claim can be lodged a Polish or Jewish family who was displaced during the war on your purchased property?

If you are planning to buy a residential apartment with its own title, it is extremely unlikely that you will have a claim on your property in this manner. If you buy a property in good faith there is a Polish law protecting you from claims from third parties. However in the case of purchasing an entire building, checks should be done more carefully employing a good notary (solicitor).

A Residents Permit is not required unless living in Poland more than 183 days per year.

Polish nationality may be obtained if Grandparents were Polish nationals. This may help bypass some of the above-mentioned restrictions.

In Poland, local property agents charge the buyer as well the seller a fee. This is normally 3% to both parties. This means straight away that a yield has to be at least 6%. Due to the restrictions on foreigners buying property and the lack of market transparency most agents will offer a tailored service. Please contact us if you are interested in a tailored service and will provide more information.

This is normally 3 % (plus vat at 22%) payable by both buyer and seller.

This is known as Civil Law Activity Tax and is equal to 2% of the purchase price. This must be paid within 14 days of completion. However if you are buying a new build property then VAT if applicable and not stamp duty. This is currently 7%.

The notary can set his own rates within these parameters and with varies with the value of the property. VAT is also applicable at 22%.

• Up to 3000 PLN - you pay maximum 100 PLN
• Over 3000 PLNand below 10000 PLN – you pay 3% of the balance plus 100 PLN
• Over 10000 PLN and below 30000 PLN - you pay 2% of the balance plus 310 PLN
• Over 30000 PLN and below 60000 PLN – you pay 1% of the balance plus 710 PLN
• Over 60000 PLN and below 1000000 PLN – you pay 0.5% of the balance plus 1010 PLN
• Over 1000000 PLN – you pay 0.25% of the balance plus 5710 PLN. In addition this is limited to no more not than 6 x average monthly salary for the proceeding year.

For eample you buy a property for 75000 PLN you will pay 0.5% of 15000 PLN =75 PLN plus 1010 PLN making a total of 1085 PLN.

The above rates apply to Private Apartments, Houses and Land (Mieszkanie hipoteczne lub dom lub dzialka.) For community owned housing (Mieszkanie spoldzielcze / wlasnosciowe) the notary rates are half the above figure.

It will also depend on whether there is only one contract (a final contract) or also a preliminary contract. You will be charged for each contract. However the notary will probably charge less than the maximum fee if you using both contracts and this is negotiable.

There are two payments depending on the transaction and both are subject to VAT at 22%.

60 PLN for creating an entry into the land registry.

200 PLN for entering your name into land registry

These cost are not applicable to community owned housing (Mieszkanie spoldzielcze / wlasnosciowe).

The notary acts as a legal judge is only responsible for putting a contract into the public domain. The notary does not represent your interests in purchasing a property in Poland. Nor he is responsible for checking local developments that may affect the value of your property or check the condition.

Therefore you may want to add an extra layer of security by employing a lawyer to check the contract over for them. This should not be more than a few hours work for the purchase of a residential apartment, including a consultation. Larger investments will naturally take more time. Budget approximately 300 PLN per hour but this is variable.)

These will vary depending on local cost and amount of paperwork required.They will also vary depending on the exchange rate and the area in which you buy.

Having decided that you want to buy in Poland, you need to verify whether a permit is necessary or not. It is also best to arrange the mortgage before commencing your property search.

After finding your ideal property you need to appoint a Notary to handle the purchase. Please ensure that the Notary you appoint to handle the purchase is independent of both the agent and the vendor, in order to avoid conflict of interest.

Sometimes a reservation deposit will be demanded to take the property off the market However this is typically non-refundable and not legally binding, and requires good faith on behalf of both parties in order for the contract to be entered. We do not recommend such an action.

A property valuation will be required if you need a mortgage. A recognized professional valuer should do this. The valuer will also give an opinion of the potential rental income in case of application for a 'buy to let' mortgage. If the valuation is satisfactory, the mortgage can be approved and funds will be released on the date of the final contract.

Before the bank will release funds, on the contract date, they also need the following documents:-

• A Deed from the Notary, confirming that you, the purchaser, can buy and get unencumbered legal title to the property.
• A copy of the development / builders certificate.
• Property insurance assigned to the bank.
• Bridging insurance to protect the purchase until the your name has been entered into the Land and Mortgage Registry.

Once you have your funding arranged you need to set up a polish bank account for receiving and paying out the funds. The lending bank will also need this to be set up before they will release funds to complete the purchase when contracts are signed.

If the property is already built and the owner is ready to sell and your finance is in place, the purchase can be completed with one final contract. This is a relatively simple process.

More often, however, a preliminary contract will be required which commits both parties to the sale of the property at a future date, but allows for additional arrangements to be made before completion of the sale.

A preliminary contract should be used for example if the you still need to arrange the mortgage or to raise finance, or when buying a property off plan or which outstanding renovation work needs to be completed before the sale can be finalized. This is then followed by a final contract when all requirements have been met.

After agreeing the price with the vendor, a contract will be drawn up by a notary for the sale between the two parties. For such a transaction, the notary should have an off the shelf contract which they can prepare inexpensively and quickly.

Prior to the signing of the contract, which normally takes place in the notary’s office, the notary will check the title of the property to ensure that there are no undisclosed claims or encumbrances registered against the it, such as undeclared mortgages. The notary will also check that the name registered on the title corresponds with the person/s selling the property.

Once the terms of the contract have been agreed, the contract is signed by both parties and stamped by the notary which represents completion of the transaction. The notary contract is the buyer’s proof of ownership.

The notary is required by law to instruct the land registry to transfer the title of ownership into the purchaser’s name. This can take up to three months.

After signing the contract, the purchaser is required to transfer the funds to the vendor, normally by bank transfer. It is to better to have the funds cleared in a Polish bank account so the transfer can be executed in one day, as opposed to up to three days if the transfer is being made from overseas.

A preliminary contract allows both parties to have a legally binding commitment to ensure that the sale will go through at a specified date. Normally the purchaser will have to put down a deposit of between 10%-30% which is negotiable with the seller. The preliminary contract is signed with a notary.

During the preliminary contract phase, a date is set for the signing of the final contract, which again is negotiable and will depend on the position of both the buyer and seller. A typical period can be anything up to 3 months. This can be much longer when entering into a contract to purchase an off-plan property.

You can also have a preliminary contract, which is not notarised. This does not give you any rights to the property should the contract be broken, but you can claim money back through the court system.

Life insurance is recommended to ensure that the mortgage can be paid off in the case of death, without leaving your partner and family in debt. You should also take out Comprehensive household insurance to protect your home and contents.

Off-plan development can either be a new build development project or an old building renovation.

The developer will normally propose layouts of each of the apartments that he intends to build, which are sold by the square metre. However in the case of completely new developments, the layouts and even sizes of the apartments can be adjusted according to the requirements of the purchaser.

A pre-agreement contract is always used when you purchase a property off-plan in Poland, in which the required specifications, schedule of building works and schedule of payments for the apartment will be laid out.

Normally, penalties for both parties are written into the contract stating that, for example, if either the payments are not made or if the building work is not completed as described (or within the required time frame), penalties must be paid.

Off-plan developments in Poland are characterized by fairly strict payment schedules in which the payments are made as the construction work is completed, unlike for example the UK, where work will generally be carried in advance of required payments from the buyer.

Make sure that the developer has a proven track record, a good local reputation and other assets within the company against which you will have security should you encounter problems. Also you should employ a good lawyer to check over the contract carefully.

There are two ways in which to secure mortgage finance for a Polish property:

• Securing a mortgage against (or refinancing) property in your country of origin and using the cash to purchase a property in Poland.
• Apply directly to Polish banks that specialize in lending to foreign investors.

Domestic Banks will rarely take the risk of lending against property in a foreign country such as Poland. They probably have limited knowledge of the Polish real estate market, and having to deal with an unfamiliar language and legal system could make the task of repossessing a property (in the event of a default on mortgage repayments) extremely difficult.

However your local bank, will lend against your domestic property. Many buyers choose to refinance existing properties, enabling them to bring cash to Poland to buy property. Unfortunately this does not permit the interest payments in your own country to be offset against rental income in Poland, resulting in a higher tax bill.

To avoid this situation and minimise your tax liability we suggest taking out a mortgage with a Polish Bank. There are many local banks and overseas banks who will lend against a property in Poland assessing borrowing capacity on foreign income.

Most lenders will lend up to 80% of Loan to Value (LTV) in the major currencies, USD, EUR, CHF and GBP, as well as PLN. You need to consider whether you wish for benefit by using your own currency to avoid exchange rates costs or a currency with a lower interest rate.

Please note that Polish Banks charge an sanctioning fee of 1% to 2.5% for issuing a mortgage. There can also an exchange rate fee for non PLN mortages.

Please note that for Buy to Let lending, the maximum is 70% LTV. If you are Buying to Let, 50% of the Polish rental income can also be included as income.

It is recommended that you obtain a provisional mortgage agreement before commencing your property search, as this will speed the buying process.

Mortgages can be obtained for any period up to 35 years depending on your age. There is a maximum of 25 years in the case of Buy To Let. Mortgages are only available as repayment with the interest rates either being fixed or variable.

Getting a local provisional mortgage offer takes about 5 days if you are employed or up to 10 working days if you self employed or running your own company.

You will need to provide the following documents:-

• Complete Bank's Application Form (in Polish or English).
• Proof of employment / confirmation of salary details (e.g. copies of pay slips for 6 months and/or most recent annual tax return).
• A statement of Assets and Liabilities.
• A certified copy of your passport.
• Copies of personal main bank account statements for the past 6 months.
• Credit report (or if unobtainable, opinion from the bank)

If you are self employed or running your own company, you will need to provide the following documentation:-

• A full explanation of the type of business and copies of the last two year's financial statements, signed by a qualified accountant.
• A letter from accountant stating that the last three years tax paid and up-to-date, level of income for the same period and information about your ability to pay the mortgage loan.
• Statement of profits and losses and balance from last and current year.
• Company registration documents.
• Business bank statements for the last six months.

For foreign buyers there is a 10 percent tax on a property that is resold within five years unless the proceeds are invested in another Polish property. If only part of the funds, are reinvested, the balance will be subject to 10% tax.

If resident less than 184 days in a calendar year then tax liability can be calculated in your national tax office through a double tax agreement. Poland has 60 DTA with most countries.

The standard progressive rates of income tax are as follows:

You can choose to be subject to either a flat rate tax or taxed on gross rents received at standard progressive income tax (see above) on income from rental less costs. The following costs such as agent’s fees, accountancy costs, furniture purchase, and repairs can be deducted from rental income.

Flat rate tax is charged at 8.5% on the first €4,000 (15.666 PLN) or equivalent of rental income and at 20%, thereafter up to €250,000. It is reported and paid monthly in arrears (by the 20th of the following month) and the payment for December is made together with the annual tax return (by 30 April of the following year). (See Flat Rate Tax on Certain Types of Incomes Legislation of 20 November 1998)

Rental income offset against income tax is reported and paid monthly in arrears (by the 20th of the following month) and the payment for December is made in December in an equal amount to the November payment. Any over or underpayment is corrected in the annual tax return due on or before 30 April of the following year.

There are no restrictions on inheriting property in Poland. Unlike the UK, immediate family can claim on the estate, if they are not stated in the will. They Court will uphold their claim and adjust their share accordingly.

Overseas Earnings taxed at 20%.

Dividends are taxed 15%.

Receipts from intellectual property are subject to a flat tax of 20%.

Profits from stock sales incur 19% tax.

Kataster - This is the nominal rent payable to the Head Landlord when you own a flat.