In simple terms, a development agreement is a preliminary agreement entered into with a developer. Its purpose is to establish, among other things, the price and subject matter of the future agreement transferring ownership of the property. The rights and obligations arising from a development agreement may be transferred to another entity. However, if the assignment is made by a VAT payer, doubts may arise regarding the application of the correct VAT rate.
The supply of residential real estate that is not VAT-exempt is taxed at a reduced rate of 8%. This rate applies to construction covered by the social housing program. This includes residential buildings or parts thereof, excluding commercial premises, residential premises in non-residential buildings classified in the Polish Classification of Construction Objects in section 12, and structures classified in the Polish Classification of Construction Objects in class ex 1264.
It would therefore seem that since the subject of the contract transferring ownership of a residential property is taxed at an 8% rate, the assignment of rights and obligations under the development contract, which is ultimately intended to lead to the transfer of ownership, should also be taxed at the same tax rate.
However, the Supreme Administrative Court took a different view. In a resolution adopted by a seven-judge panel on June 24, 2024, file reference I FSK 1661/20, it stated that the assignment of a development agreement does not constitute a supply of goods, but rather the provision of services. It might seem that such a classification is of purely theoretical significance, exclusively for tax law dogmatists. Nothing could be further from the truth! It has significant practical implications. While the supply of residential real estate as a supply of goods is subject to 8% VAT, the assignment of a development agreement as a provision of services is subject to the standard rate of 23%.
In the justification for the resolution in question, the Supreme Administrative Court indicated that as a result of the assignment of a development agreement, "the assignee acquires (...) from the assignor the right to conclude and perform (demand the conclusion and performance of) the 'promised agreement' by the developer in the form of delivery of a residential unit, and not to dispose of such a unit as the owner. The assignee only has a claim to the extent of the developer's conclusion and performance of the agreement, and thus the same right that the assignor previously held at the time of the assignment. Since the latter did not have the residential unit at its disposal, it could not dispose of it by way of an assignment."
The essence of the delivery of goods is the transfer of the right to dispose of the property as an owner. Therefore, since the entity transferring the rights and obligations under the agreement does not dispose of the property as an owner, it cannot deliver the goods. However, under the VAT Act, the provision of services includes all transactions that do not constitute the supply of goods. Therefore, the assignment of a development agreement was deemed to constitute the provision of services and is therefore subject to VAT at 23%.
The taxable amount is the remuneration (compensation) of the entity transferring the rights and obligations (the assignor). Refunds of advance payments made towards the purchase of residential premises are a monetary benefit accompanying the transfer; they do not constitute remuneration and are not subject to value added tax.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of March 30, 2025
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