Private rental and subjective VAT exemption – when does the rental count towards the PLN 200,000 limit?
Private rental and business activity in VAT
Many people who rent out their residential properties are unaware that they are conducting business activity under the VAT Act. Polish law has several definitions of business activity, and it may be that certain activities fall under the definition of business activity under one act but not under another. Typically, the fact that someone is conducting business activity (under the VAT Act) involving the rental of their own residential properties is completely irrelevant. According to the Act, the rental of residential properties is exempt from VAT. However, such activity may be relevant for someone who, in addition to renting residential properties, also conducts other activities and benefits from a subjective exemption.
What is the subjective VAT exemption and who does it apply to?
Virtually all taxpayers can benefit from the subjective exemption, with a few exceptions listed in Article 113 of the VAT Act. The exemption stipulates that the sale of goods and services will be exempt from VAT if the value of the taxpayer's sales in the previous and current year does not exceed PLN 200,000.
See also: New VAT exemption limit – what will change from 2026? | LEX TV
What is the subjective VAT exemption and who does it apply to?
A business using the subjective exemption must meticulously keep records of VAT sales to ensure compliance with the sales limit for which the exemption can be applied. This can be problematic in the case of residential property rentals. The limit does not include the exempt supply of goods or the provision of paid services. However, real estate transactions, among others, are an exception, provided they are not ancillary in nature.
Is private rental an ancillary activity? KIS interpretation of August 21, 2025.
Does private rental therefore constitute an ancillary activity, the income from which does not count towards the limit entitling to subjective VAT ? The Director of the National Tax Information Office (KNI) ruled that it does not. In an interpretation dated August 21, 2025, reference number 0111-KDIB3-3.4012.463.2025.1.AM, he stated that private rentals do not constitute ancillary activities when the taxpayer's registered business activity is completely unrelated to the real estate being leased. He also referred to the English and French VAT Directives, where the terms used denote incidental transactions. Long-term rentals are, by definition, concluded for a longer period and are therefore not incidental in nature.
How does renting affect the loss of VAT exemption?
Therefore, when taking advantage of the VAT exemption and renting out your own residential property, it's important to remember to record both the sale of goods and services from your core business and rental income. Unwittingly, you could lose your right to the exemption, exposing yourself to the obligation to pay VAT and interest, and perhaps also to tax criminal proceedings.
This article is for informational purposes only and does not constitute legal advice.
The law is current as of November 16, 2025.
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