Revenue from the sale of the whole or part of immovable property, which belongs to an agricultural farm, is tax-free, according to Article 21 item 1 point 28 of the Personal Income Tax Act. The term “agricultural farm” (Polish: gospodarstwo rolne) should be defined according to provisions of the Agricultural Tax Act (Journal of Laws of 2006 No. 136, item 969, as amended). Agricultural farm means immovable property with a total surface exceeding 1 ha or 1 ha for calculation purposes, which is classified within the Land and Property Register as agricultural area or trees or bush-covered agricultural area.

Taking advantage of the tax exemption is not contingent upon conducting agricultural activity on such land, unless business activity is conducted (in such case there is no entitlement to the exemption). Nevertheless, it is crucial, whether in connection with the sale the land will be not deprived of its agricultural character. Otherwise, the revenue shall not be exempted. This involves both the cessation of the agricultural activity prior to the sale, as well as the situation in which on the date of the transaction the owner is aware of the acquirer’s intention to use the land for purposes other than agricultural ones. According to the established statement within the Polish judicial decisions (see Chief Administrative Court’s Decision of January 9, 2014, Ref. No. II FSK 199/12), the factual circumstances existing as of the date of sale are crucial for determining the agricultural character of the land. The taxpayer, taking into consideration the intentions of the acquirer as regards using the immovable property, should be able to estimate, on the date of signing the sale agreement, whether he or she has earned tax revenue from the sale of property (Article 19 of the Personal Income Tax Act).

Nevertheless, the change of agricultural character of the land made by the acquirer in the future does not influence the application of the above exemption, since the seller cannot be liable for the actions of the acquirer, which he or she cannot influence.

Dr. Janusz Marciniuk
Tax Advisor, Marciniuk & Partners
Dziennik Gazeta Prawna, June 16, 2014