Renting real estate through a Polish Limited Liability Company (sp. z o.o.) is subject to Corporate Income Tax (CIT) at a rate of 9% (for small taxpayers) or 19%, and Value Added Tax (VAT) at 23%, 8%, or is VAT-exempt, depending on the property type and rental purpose. Furthermore, since 2023, tax depreciation is strictly limited to commercial properties. Below is a comprehensive overview of the regulations, rates, and compliance obligations for the 2025/2026 tax year in Poland.
How does a Polish LLC settle rental income for CIT purposes?
Rental income generated by an LLC is treated as operational revenue. It is taxed at either a 9% CIT rate (preferential rate for small taxpayers) or the standard 19% rate. The tax base is the company’s income, which is calculated as revenue minus tax-deductible costs.
The 9% CIT rate — conditions for small taxpayers
The 9% CIT rate is available to LLCs whose net sales revenue in a given tax year does not exceed the equivalent of EUR 2 million. For 2025, this limit translates to PLN 8,534,000 (converted using the average National Bank of Poland exchange rate from the first business day of the tax year). Additionally, the company must hold “small taxpayer” status, meaning its gross sales revenue (including VAT) in the previous year did not exceed EUR 2 million.
This 9% rate applies exclusively to revenues (incomes) other than capital gains (Art. 19 sec. 1 point 2 of the CIT Act). Property rental income falls into this operational category, allowing qualifying small taxpayers to benefit from the preferential rate.
When does an LLC lose the right to the 9% CIT rate?
If a company exceeds the PLN 8,534,000 net revenue threshold during 2025, it loses the right to the 9% rate for the entire tax year. The LLC must then recalculate its CIT advances using the 19% rate starting from the month (or quarter) the threshold was crossed. While there is no obligation to correct previously paid tax advances, the entire annual income must be taxed at 19% in the final CIT-8 annual return.
In our experience at Progress Holding, LLCs managing multiple rental properties often approach the EUR 2 million threshold primarily due to rental income. Therefore, we highly recommend monitoring cumulative revenue on a quarterly basis.
Tax-deductible costs of property rental in an LLC
An LLC can deduct all expenses incurred to generate rental income. Typical costs include: depreciation write-offs (strictly for commercial properties — more on this below), mortgage interest, property insurance, local property tax, property management fees, routine maintenance costs, and real estate agent commissions.
Expenses for property improvement (increasing the initial value of a fixed asset by more than PLN 10,000 net annually) are not direct costs. Instead, they increase the initial value of the property and are settled over time through depreciation (Art. 16g sec. 13 of the CIT Act).
What VAT rate applies to property rental by an LLC?
Property rental by a Polish LLC is subject to VAT at one of three rates: 23% (commercial properties), 8% (short-term accommodation, PKWiU 55), or it can be VAT-exempt (residential properties rented strictly for housing purposes on the company’s own account). The determining factors are the purpose of the lease and the nature of the property.
VAT rates on rental — overview
| Type of rental | VAT rate | Legal basis | Conditions |
|---|---|---|---|
| Commercial property (office, warehouse, retail) | 23% | Art. 41 sec. 1 VAT Act | Standard rate — no preferential rate or exemption available |
| Short-term accommodation (daily, hotel-style) | 8% | Annex No. 3 to the VAT Act, item 47 (PKWiU 55) | Accommodation services, high guest turnover, tourist or business stays |
| Apartment for residential purposes (long-term) | Exempt (zw.) | Art. 43 sec. 1 point 36 VAT Act | Residential property + rented on own account + strictly for housing purposes |
| Apartment rented to a business (for employees) | 23% | General Ruling of the Ministry of Finance No. PT1.8101.1.2021 | Tenant is a business entity → exemption does not apply (since 2021) |
VAT exemption — 3 mandatory conditions
To benefit from the VAT exemption under Art. 43 sec. 1 point 36 of the VAT Act, three conditions must be met simultaneously. The property must be residential. The rental must be conducted on the landlord’s own account. Finally, the premises must be used exclusively for the residential purposes of the tenant or for social rental agencies.
Since 2021, a general interpretation by the Minister of Finance (No. PT1.8101.1.2021) clearly states that renting a residential property to another business — even if it ultimately houses their employees — does not qualify for the VAT exemption. In this B2B scenario, the LLC must issue an invoice with 23% VAT.
Among our foreign clients, we most frequently see LLCs investing in commercial real estate. In such cases, the VAT rate is always 23%, with no exemption possible. The company can deduct the input VAT on expenses related to the rental (renovations, equipment, utilities) under standard rules.
VAT exemption limit based on sales volume
An LLC may use the subjective VAT exemption (Art. 113 sec. 1 of the VAT Act) if its annual turnover does not exceed PLN 200,000 (PLN 240,000 from 2026). Rental income counts towards this limit unless it qualifies as an ancillary real estate transaction. Exceeding this limit triggers the obligation to register as an active VAT taxpayer and charge VAT on all subsequent invoices.
Can an LLC depreciate rented real estate?
As of January 1, 2023, a Polish LLC cannot depreciate residential real estate for tax purposes. Tax depreciation remains permitted strictly for commercial (non-residential) buildings and premises, applying rates from the List of Annual Depreciation Rates (Annex No. 1 to the CIT Act).
The ban on residential property depreciation
Article 16c point 2a of the CIT Act introduced an absolute ban on the tax depreciation of residential buildings, residential premises constituting separate real estate, and cooperative ownership rights to residential premises. This ban applies regardless of when the property was acquired, how it is used, or the legal form of the taxpayer.
This means an LLC that purchased an apartment for rental purposes cannot include any depreciation write-offs as tax-deductible costs. However, it can still deduct ongoing operational expenses: maintenance, insurance, property taxes, and mortgage interest.
Depreciation rates for commercial properties
| Property type (KŚT Classification) | Annual rate | Conditions for individual rate |
|---|---|---|
| Non-residential buildings (KŚT group 1, subgroups 10–10) | 2.5% | Standard List rate (straight-line method) |
| Commercial unit — used (min. 60 months prior) | up to 10% | Art. 16j sec. 1 point 4 CIT Act — individual rate |
| Commercial unit — after major upgrade (min. 30% value) | up to 10% | Art. 16j sec. 3 point 2 CIT Act |
| Non-residential building in a high unemployment area | up to 10% | Art. 16j sec. 7–13 CIT Act (expanded scope from 2025) |
We have guided hundreds of clients through the process of registering real estate in their fixed asset registers. The most common mistake is misclassifying a building as non-residential based solely on its current physical use, rather than its official designation under the Classification of Fixed Assets (KŚT). The official KŚT registry entry dictates tax treatment, not the practical daily use of the premises.
Exception: mixed-use buildings
If a building contains both residential and commercial units — and the units have not been legally separated — its KŚT classification depends on its primary purpose. A building where commercial units occupy more than 50% of the usable floor area is classified entirely as non-residential (e.g., KŚT 103 — commercial and service buildings) and is fully depreciable. This has been confirmed by individual tax rulings.
Estonian CIT — an exception to the residential depreciation ban
LLCs opting for the “Estonian CIT” (lump-sum tax on corporate income) determine their tax base using accounting law, not standard tax law. Consequently, the ban on depreciating residential real estate does not apply to them — they can process accounting depreciation for apartments in accordance with the Accounting Act. Tax authorities have confirmed this approach in multiple rulings.
However, accounting depreciation under Estonian CIT does not lower the current income tax. The Estonian CIT model does not tax ongoing income; the tax obligation only arises when profits are distributed (via dividends, hidden profits, or non-business expenses).
What is the tax on revenue from buildings and when does it apply?
The tax on revenue from buildings (Art. 24b of the CIT Act) is an additional levy of 0.035% per month on the initial value of buildings leased, rented, or subjected to similar agreements. It applies to buildings located in Poland that are fixed assets of the LLC. The tax base is the total value of the rented buildings minus a tax-free allowance of PLN 10,000,000.
When does an LLC have to pay this tax?
This tax is due if the combined initial value of the buildings leased out (determined on the first day of each month) exceeds PLN 10 million. For affiliated entities, the PLN 10 million tax-free allowance is divided proportionally among the group.
Importantly, this tax applies strictly to “buildings” as defined by construction law. It does not apply to individual, legally separated premises (apartments or commercial units) within a building, as confirmed by tax authorities.
How the settlement works
The amount paid as tax on revenue from buildings can be deducted from the standard monthly CIT advance. If the standard CIT advance is higher than the building tax, the company suffers no additional economic burden. Any excess building tax not deducted during the year can be settled in the annual CIT-8 return. The payment deadline is the 20th day of the month following the taxable month.
What are the documentation duties for an LLC renting property?
An LLC renting real estate must maintain full accounting records, issue VAT invoices (or “exempt” invoices), submit JPK_VAT files, and file an annual CIT-8 return. Starting February 1, 2026, rental invoices must be issued through the National e-Invoicing System (KSeF).
Compliance obligations in 2025/2026 — overview
| Obligation | Deadline / frequency | Notes |
|---|---|---|
| VAT invoice for rent | By the 15th day of the following month | Mandatory in KSeF starting Feb 2026 |
| JPK_VAT with declaration | Monthly or quarterly by the 25th | From Feb 2026: new JPK_V7M(3) structure requiring KSeF numbers |
| CIT advance payment | Monthly by the 20th or quarterly (small taxpayers) | 9% rate applicable if conditions are met |
| Tax on revenue from buildings | Monthly by the 20th | Only if total building value > PLN 10M |
| Annual CIT-8 return | By the end of the 3rd month after the tax year ends | For the calendar year — by March 31 |
| Financial statements | Within 3 months of balance sheet date (preparation) + 15 days (approval) + 15 days (KRS filing) | Mandatory for every sp. z o.o. |
| Local property tax | Installments: 1st by Jan 31, subsequent by the 15th of each month | Rates depend on the municipality and property type |
At Progress Holding, we assist LLCs in the real estate sector from the very first document post-incorporation. Full accounting services for an LLC — including CIT, VAT, fixed asset registers, and financial statements — start at PLN 799 net per month.
LLC property rental vs. private rental — tax comparison
Taxing rental income in an LLC differs significantly from private rental regarding tax rates, cost deductions, and reporting requirements. The table below compares both models for 2025/2026.
| Criteria | Rental in an LLC (standard CIT) | Private rental (lump sum) |
|---|---|---|
| Income taxation form | CIT 9% or 19% on net income | Lump sum (ryczałt) 8.5% / 12.5% on gross revenue |
| Cost deduction | Yes — full deduction of operational costs | No — costs cannot be deducted under lump sum |
| Depreciation of commercial units | Yes (2.5% or up to 10%) | Yes (if run as sole proprietorship), No (if private lump sum) |
| Depreciation of residential units | No (banned since 2023) | No (banned since 2023) |
| Profit distribution to shareholder | Dividend — extra 19% PIT (total 26.29% or 34.39%) | None — profit belongs directly to the individual |
| Social Security (ZUS) / Health contribution | No contributions on rental income (but board members may pay ZUS) | No ZUS or health contributions on private rental |
| Accounting | Full corporate accounting (mandatory) | Simple revenue register |
| Preferential limit | 9% CIT up to EUR 2 million revenue | 8.5% up to PLN 100K (PLN 200K for spouses) |
Private rental on a lump sum is simpler and avoids double taxation (no corporate tax + dividend tax). However, an LLC becomes highly profitable when operational costs and mortgage interest are high, the property is commercial (allowing depreciation), or when the company reinvests profits using the Estonian CIT framework.
How does it look in practice? Progress Holding’s experience
Based on our analysis of over 280 LLCs with real estate portfolios managed by Progress Holding, we’ve identified the 5 most common tax settlement errors.
| Error | Frequency (% of clients) | Consequences |
|---|---|---|
| Depreciating residential property despite the 2023 ban | 31% | Overstated costs → understated CIT → penalties and interest |
| Applying VAT exemption when renting an apartment to a business | 27% | Understated output VAT → JPK_VAT correction + interest |
| Failing to monitor the EUR 2M threshold (loss of 9% CIT) | 19% | CIT underpayment for the whole year + interest |
| Incorrect KŚT building classification (residential vs commercial) | 15% | Incorrect depreciation rates or missed depreciation |
| Ignoring the tax on revenue from buildings (Art. 24b) | 8% | Tax arrears + interest (if building value > PLN 10M) |
The most frequent issue — affecting nearly one in three new companies that transfer to us from other accounting firms — is the continued depreciation of residential properties after January 1, 2023. In many cases, we have to correct CIT-8 returns for 2023–2024 and pay outstanding tax with interest. Proper KŚT classification during the initial setup of the fixed asset register eliminates this problem entirely.
Frequently Asked Questions (FAQ)
Can an LLC rent an apartment without VAT?
Yes, but strictly if the rental concerns a residential property, is conducted on the LLC’s own account, and the unit is used exclusively for the residential purposes of the tenant (a private individual). Renting an apartment to another company — even to house their staff — is subject to 23% VAT.
Can an LLC under Estonian CIT depreciate apartments?
Yes, in an accounting sense. A company under Estonian CIT applies depreciation according to the Accounting Act, effectively bypassing the tax ban from Art. 16c point 2a of the CIT Act. However, this accounting depreciation does not directly reduce tax liability, as Estonian CIT is only levied upon profit distribution.
What is the depreciation rate for a commercial unit in an LLC?
The standard rate is 2.5% annually. If the commercial unit was previously used for at least 60 months or has undergone significant improvement (expenses ≥ 30% of the initial value), the company can apply an individual rate of up to 10% annually.
Is rent paid to a shareholder a tax-deductible cost for the LLC?
Yes, provided the rent reflects market value. An LLC renting property from its shareholder treats the rent as a deductible cost. However, because this is a transaction between related parties, transfer pricing rules apply. Rent that is artificially high or low may be challenged by tax authorities.
Is the re-invoicing of utilities to a tenant considered LLC revenue?
Rulings from tax authorities and administrative courts vary. The Supreme Administrative Court confirmed in 2024 that utility fees transferred to the tenant do not constitute revenue for the landlord if they are not a definitive economic gain. In practice, the safest method is to re-invoice utilities as a separate line item and settle VAT on that amount.
How much does accounting for property rental in an LLC cost?
At Progress Holding, full accounting services for an LLC managing real estate — encompassing fixed asset registers, depreciation, CIT and VAT settlements, JPK_VAT, and financial statements — start at PLN 799 net per month. Correcting past VAT or CIT declarations costs an additional PLN 250 net.
Taxing property rental within a Polish LLC requires navigating CIT, VAT, depreciation rules, and occasionally the tax on revenue from buildings. Each area has its own thresholds, rates, and exceptions. Proper classification of the property (residential vs. commercial) and choosing the right taxation framework (standard CIT vs. Estonian CIT) can alter your effective tax burden by double digits. Do you need professional assistance managing your real estate taxes in Poland? Contact Progress Holding at +48 603 232 418 or email us at office@progressholding.pl.
